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CASE NO.:

Writ Petition (civil) 202 of 1995

PETITIONER:

T.N. Godavarman Thirumulpad

RESPONDENT:

Union of India & Ors.

DATE OF JUDGMENT: 26/09/2005

BENCH:

Y.K.Sabharwal,Arijit Pasayat & S.H.Kapadia

JUDGMENT:

J U D G M E N T

IA NO.826 IN IA NO.566

IN

WRIT PETITION (C) NO.202 OF 1995

[WITH IA NO.932 IN 819-821, 955, 958, 985, 1001-1001a, 1013-

1014, 1016-1018, 1019, 1046, 1047, 1135-1136, 1137, 1164, 1180-

1181 AND 1182-1183, 1196, 1208-1209, 1222-1223, 1224-1225,

1229, 1233, 1248-1249, 1253, 1301-1302, 1303-1304, 1312, 1313,

1314, 1315-1316, 1318 AND 1319 IN WP (C) NO. 202 OF 1995]

Y.K. Sabharwal, J.

Natural resources are the assets of entire nation. It is the obligation

of all concerned including Union Government and State Governments to

conserve and not waste these resources. Article 48A of the Constitution of

India requires the State shall endeavour to protect and improve the

environment and to safeguard the forest and wild life of the country. Under

Article 51A, it is the duty of every citizen to protect and improve the natural

environment including forest, lakes, rivers and wild-life and to have

compassion for living creatures.

In the present case, the question is about conservation, preservation

and protection of forests and the ecology. When forest land is used for

non-forest purposes, what measures are required to be taken to

compensate for loss of forest land and to compensate effect on the

ecology, is the main question under consideration.

Forests are a vital component to sustain the life support system on

the earth. Forests in India have been dwindling over the years for a

number of reasons, one of it being the need to use forest area for

development activities including economic development. Undoubtedly, in

any nation development is also necessary but it has to be consistent with

protection of environments and not at the cost of degradation of

environments. Any programme, policy or vision for overall development

has to evolve a systemic approach so as to balance economic

development and environmental protection. Both have to go hand in hand.

In ultimate analysis, economic development at the cost of degradation of

environments and depletion of forest cover would not be long lasting.

Such development would be counter productive. Therefore, there is an

absolute need to take all precautionary measures when forest lands are

sought to be directed for non forest use.

The point in issue is whether before diversion of forest land for non-

forest purposes and consequential loss of benefits accruing from the

forests should not the user agency of such land be required to compensate

for the diversion. If so, should not the user Agency be required to make

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payment of Net Present Value (NPV) of such diverted land so as to utilize

the amounts so received for getting back in long run the benefits which are

lost by such diversion? What guidelines should be issued for

determination of NPV? Should guidelines apply uniformly to all? How to

calculate NPV? Should some projects be exempted from payment of NPV?

These are the main aspects which require examination and determination

in the backdrop of various legislations which we would presently notice.

The legislature to provide for conservation of forest and for matters

connected therewith or ancillary or incidental thereto enacted the Forest

(Conservation) Act, 1980 (for short, the 'FC Act'). It postulates that no

State Government or other authority shall make, except with the prior

approval of the Central Government, any order directing that any forest

land or any portion thereof may be used for any non-forest purpose. The

Central Government under the FC Act has been empowered to constitute

a Committee to advice it with regard to grant of approval. Under Section 2

of the Act the question of use of any forest land for non-forest purposes

and any other matter connected with the conservation of forest may be

referred to such a committee by the Central Government under the FC Act.

The contravention of any of the provisions of Section 2 has been made an

offence.

Noticing the decline in environment quality due to increasing

pollution, loss of vegetal cover and biological diversity, excessive

concentrations of harmful chemicals in the ambient atmosphere and in

food chains, growing risks of environmental accidents and threats to life

support system, the Environment (Protection) Act, 1986 (for short, the 'EP

Act') has been enacted. It has been noted in the Statement of Objects and

Reasons that although there are existing laws dealing directly or indirectly

with several environmental matters, it is necessary to have a general

legislation for environmental protection. Existing laws generally focus on

specific types of pollution or on specific categories of hazardous

substances. Some major areas of environmental hazards are not covered.

There also exist uncovered gaps in areas of major environmental hazards.

There are inadequate linkages in handling matters of industrial and

environmental safety. Control mechanisms to guard against slow,

insidious build up of hazardous substances, especially new chemicals, in

the environment are weak. Because of a multiplicity of regulatory

agencies, there is need for an authority which can assume the lead role for

studying, planning and implementing long-term requirements of

environmental safety and to give direction to, and co-ordinate a system of

speedy and adequate response to emergency situations threatening the

environment. The EP Act was, therefore, enacted to provide for protection

and improvement of environment and for matters connected therewith.

The Central Government has been given wide powers to take measures to

protect and improve the environment as provided under Section 3

including the power to constitute an authority or authorities for the purpose

of exercising and performing such of the powers and functions, including

the power to issue directions under Section 5, of the Central Government

under the Act and for taking measures with respect to such of the matters

referred to in sub-section (2) of Section 3 as may be mentioned in the

order and subject to the prejudice and control of the Central Government.

Section 5 of the EP Act empowers the Central Government, in exercise of

its powers and performance of its function under the Act, to issue

directions in writing to any person, officer or any authority and such

person, officer or authority shall be bound to comply with such directions.

The Central Government has the power to direct the closure, prohibition or

regulation of any industry, operation or process or stoppage of regulation

of the supply of electricity or water or any other service.

Parliament has also enacted enactments to prevent and control

water pollution and air pollution [The Water (Prevention and Control of

Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act,

1981].

A statement was placed before this Court by the Central

Government showing the position as on 20th March, 2000 of the cases

approved for diverting forest lands, stipulation for compensatory

afforestation under the FC Act and the compensatory afforestation done,

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funds to be utilized and actually utilized. The Court noted the dismal

situation as there was a shortfall to the extent of 36% of total afforestation

compensatory or otherwise afforestation. It further noted that though funds

had been realized by all the States in connection with such afforestation, a

very large number of States had spent 50% or less amount on

afforestation. In this background, taking suo moto action, notices were

directed to be issued to the States mentioned in the Order dated 17th April,

2000 to explain as to why moneys realized have not been spent on

carrying out afforestation.

On 23rd November, 2001, after considering the affidavits that had

been filed, it was noted that large sums of money had been realized by

various States from the user-agency to whom permits were granted to use

forest land for non-forest purposes. The moneys were paid by user

agencies to the State Governments for compensatory afforestation but the

utilization was only about 83% of the funds actually realized by the State

Governments, the shortfall being of nearly Rs.200 crores.

The Ministry of Environment and Forests (MOEF) was directed to

formulate a scheme providing that whenever any permission is granted for

change of use of forest land for non-forest purposes and one of the

conditions of the permission is that there should be compensatory

afforestation, then the responsibility of the same should be that of user-

agency and it should be required to set apart a sum of money for doing the

needful. In such a case the State Government will have to provide or

make available land on which reforestation can take place and this land

may have to be made available either at the expense of the user-agency or

of the State Government, as the State Government may decide. It was

decided that the scheme shall ensure that afforestation takes place as per

the permissions which are granted and there should be no shortfall.

The scheme was submitted by MOEF alongwith an affidavit dated

22nd March, 2002.

The Central Empowered Committee (CEC) on consideration of

relevant material including the scheme submitted by MOEF made its report

(IA 826) containing recommendations dated 9th August, 2002. The report,

taking note of the present system of compensatory afforestation as per

guidelines issued by MOEF from time to time under the FC Act, the

procedure for receipt and utilization of funds for compensatory

afforestation, activities permissible under compensatory afforestation,

adequate compensation for loss of forest land \026 recovery of Net Present

Value, funds for catchment area, treatment plant and involvement of user-

agency for compensatory afforestation, made the following

recommendations :

(a) in addition to the funds realized for

compensatory afforestation, net present

value of the forest land diverted for non-

forestry purposes shall also be recovered

from the user agencies, while according

approval under the Forest (Conservation)

Act, 1980;

(b) a 'Compensatory Afforestation Fund' shall

be created in which all the monies received

from the user-agencies towards

compensatory afforestation, additional

compensatory afforestation, penal

compensatory afforestation, net present

value of forest land, Catchment Area

Treatment Plan funds, etc., shall be

deposited. The rules, procedure and

composition of the body for management of

the Compensatory Afforestation Fund shall

be finalized by the Ministry of Environment

& Forests with the concurrence of Central

Empowered Committee within one month;

(c) the funds received from the user-agencies

in cases where forest land diverted falls

within Protected Areas i.e. area notified

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under Section 18, 26A or 35 of the Wild Life

(Protection) Act, 1972, for undertaking

activities related to protection of bio-

diversity, wildlife, etc., shall also be

deposited in this Fund. Such monies shall

be used exclusively for undertaking

protection and conservation activities in

protected areas of the respective State/UT;

(d) the amount received on account of

compensatory afforestation but not spent or

any balance amount lying with the State/UT

or any amount that is yet to be recovered

from the user agency shall also be

deposited in this Fund;

(e) besides artificial regeneration (plantations),

the funds shall also be utilized for

undertaking assisted natural regeneration,

protection of forests and other related

activities. For this purpose, site specific

plans should be prepared and implemented

in a time bound manner;

(f) the user agencies especially the large

public sector undertakings such as Power

Grid Corporation, NTPC, etc., which

frequently require forest land for their

projects should also be involved in

undertaking compensatory afforestation by

establishing Special Purpose Vehicle.

Whereas the private sector user-agencies

may be involved in monitoring and most

importantly, in protection of compensatory

afforestation. Necessary procedure for this

purpose would be laid down by the MOEF

with the concurrence of the Central

Empowered Committee.

(g) Plantations must use local and indigenous

species since exotics have long term

negative impacts on the environment; and

(h) an independent system of concurrent

monitoring and evaluation shall be evolved

and implemented through the

Compensatory Afforestation Fund to

ensure effective and proper utilization of

funds.

The aforesaid report, inter alia, notes that there was general

consensus amongst the States/Union Territories that the present practice

of concentrating only on artificial regeneration through plantations should

be dispensed with as it does not adequately compensates the loss of

natural forest and that a part of the fund should also be used for assisted

natural regeneration wherein the natural forests are allowed to regenerate

and grow by undertaking silvicultural and cultural operations such as fire

tracing, singalling of seedlings, protection, etc. These activities help in

regenerating the rootstock which may exists in the degraded forests.

Besides, this helps in restoring the natural forests, which is not possible

through plantations. It also noted that to compensate for the loss of

tangible as well as intangible benefits flowing from the forest lands which

has been diverted for non-forest use, the NPV of such land is being

recovered from the user agency in the States of Madhya Pradesh,

Chhattisgarh and Bihar. In the states of Madhya Pradesh and

Chhattisgarh, the NPV is being recovered at the rate of Rs.5.80 lac per

hectare to Rs.9.20 lac per hectare of the forest land depending upon the

quality and density of the forest land diverted for non-forestry use. The

underlying principle for recovery of NPV was that the plantations raised

under the compensatory afforestation scheme could never adequately

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compensate for the loss of natural forests as the plantations require more

time to mature and even then they are a poor substitute to natural forest. It

noted that States/Union Territories as well as MOEF are of the view that in

addition to the funds realized for compensatory afforestation, the NPV of

the forest land being directed for non-forestry purposes should also be

recovered from the user-agencies.

The MOEF, in principle, accepted the aforesaid recommendations of

CEC. The order dated 29th October, 2002 notices this fact. Further

noticing that no other State had filed any response to the report of CEC,

the Court presumed that the State Governments were also not opposed to

the said report and have accepted the same in the same manner as Union

of India. On detailed examination of the report, the recommendations of

CEC were accepted and Union of India was directed to frame

comprehensive rules with regard to the constitution of a body and

management of the compensatory afforestation funds in concurrence with

the CEC. It was directed that the compensatory afforestation funds which

had not yet been realized by the States shall be transferred to the

aforesaid body by respective States and the user agencies within six

months of its constitution. In addition, while according approval under the

FC Act for change in user, the user-agency shall also pay into the said

fund, the NPV of forest land diverted for non-forest purposes at the rate of

Rs.5.80 lac per hectare to Rs.9.20 lac per hectare of forest land depending

upon the quality and density of the land in question converted for non-

forest use. The amount was subject to upward revision by the MOEF in

consultation with CEC as and when necessary. The aforesaid

recommendations of CEC were accepted.

An application (I.A.No.1046) was filed by the MOEF, inter alia,

seeking directions that the NPV calculation shall be part of the detailed

project report submitted to it for a forestry clearance under the FC Act.

During the course of hearing, learned Solicitor General informed this Court

that the Government was agreeable to the suggestions of CEC that money

received from user-agencies for compensatory afforestation fund should

be kept in an interest bearing account, though initially it had some

reservations about it. Reference has also been made in the application

about exemption being granted to some projects from payment of NPV, an

aspect which we would consider later at an appropriate stage so also the

basis of the calculation of the NPV. We may, however, note that although

in the application it was stated that the format issued by the World Bank for

calculation for NPV for the projects shall be the basis of its calculation, the

learned Solicitor General stated that he was not relying upon the said

format. Regarding the mining projects, the application mentions that there

has to be difference in approach for mineral of high volume and low

volume and low value and minerals of high value and low volume. It is

stated that levying of flat rates of NPV per hectare basis will, therefore, not

be rational. The application states that in case of mining, NPV should be

calculated at the rate of 10% for the major minerals and 5% for the minor

minerals to be levied on the annual royalty. An application (IA 1047) has

also been filed by the Ministry of Mines, Government of India taking similar

pleas as are taken in IA 1046 seeking directions that in mining NPV may

be calculated at the rate of 10% and 5% as above noted.

Now, we may refer to Notification dated 23rd April, 2004 issued by

MOEF in exercise of the powers conferred by sub-section (3) of Section 3

of the EP Act constituting an authority known as Compensatory

Afforestation Fund management and Planning Authority (hereinafter

referred to as 'CAMPA') for the purpose of management of money towards

compensatory afforestation, NPV and any other money recoverable in

pursuance of this Court's order and in compliance of the conditions

stipulated by the Central Government while according approval under the

FC Act for non-forestry uses of the forest land. The Executive Body of the

Authority comprises of the following:

"(i) Director General of Forests and - Chairperson

Special Secretary, Ministry of

Environment and Forests, Government

of India

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(ii) Addl.Director General of Forests - Member

(Forests) Ministry of Environment and

Forests, Government of India

(iii) Addl.Director General of Forests - Member

(Wildlife)

(iv) Inspector General of Forests (Forest - Member

Conservation), Ministry of Environment

And Forests, Government of India

(v) Joint Secretary and Financial Advisor, - Member

Ministry of Environment and Forests,

Government of India

(vi) Chief Executive Officer (CEO) - Member

(vii) A professional ecologist, not being from - Member

The Central and State Government, for

A period of two years at a time, for up

Two consecutive terms."

The powers and functions of the Executive Body are:

"(a) deployment of staff on contractual basis or

on deputation;

(b) financial procedure;

(c) delegation of financial or administrative

powers;

(d) other day-to-day working in respect of

receipts of funds;

(e) investment of funds;

(f) expenditure on establishment and other

overheads including office accommodation

subject to the approval of the annual

budget by the Governing Body."

The management of the fund is provided in clause 6.3 and the

disbursement of the fund in clause 6.4 of the Notification. These clauses

read as under:

"6.3 Management of the Fund:

(i) The amount collected by the CAMPA shall

be invested in Reserve Bank of India,

Nationalized Banks, Post Office,

Government Securities, Government Bonds

and deposits.

(ii) The non-recurring as well as recurring cost

for the management of CAMPA including

the salary and allowances payable to its

officers and staff shall be met by utilizing a

part of the income by way of accused

interest on the funds invested by the

CAMPA excluding income from funds

received as per para 6.2(ii).

(iii) The expenditure incurred on independent

monitoring and evaluation shall be borne by

the CAMPA out of the income by way of

interest on the funds invested by the

CAMPA excluding income from funds

received as para 6.2(iii).

(iv) The CAMPA shall get the annual accounts

audited internally as well as externally

through chartered accountant(s) who are

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on the panel of the Comptroller and

Auditor-General of India and the auditor(s)

shall be selected on the approval of the

Governing Body.

6.4 Disbursement of Funds:

(i) The money received for compensatory

afforestation, additional compensatory

afforestation may be used as per the site

specific schemes received from the States

and Union Territories along with the

proposals for diversion of forest land under

the Forest (Conservation) Act, 1980.

(ii) The money received towards Net Present

Value (NPV) shall be used for natural

assisted regeneration, forest management,

protection, infrastructure dev elopement,

wildlife protection and management, supply

of wood and other forest produce saving

devices and other allied activities.

(iii) Monies realized from the user agencies in

pursuance of the Hon'ble Supreme Court's

order or decision taken by the National

Board for Wildlife involving cases of

diversion of forest land in protected areas

shall form the corpus and the income

therefrom shall be used exclusively for

undertaking protection and conservation

activities in protected areas of the States

and the Union Territories and in exceptional

circumstances, a part of the corpus may

also be used subject to prior approval of

the CAMPA.

(iv) CAMPA shall release monies to concerned

State and Union Territory in predetermined

installments through the State Level

Management Committee as per the Annual

Plan of Operation (APO) finalized by the

concerned State and the Union Territory.

(v) The monies received in CAMPA from a

State or the Union Territory as per para 6.2

and the income thereon after deducting

expenditure incurred by the CAMPA on its

establishment cost, monitoring and

evaluation on a prorate basis shall be used

only in that particular State or the union

Territory."

Clause 6.6 provides for other functions and reads thus:

"(i) The CAMPA may establish Special

Purpose Vehicles (SPV) for undertaking

compensatory afforestation particularly by

involving large public sector undertakings

which frequently require forests and for

their projects, in consultation and as far as

possible with the concurrence of the CEC.

(ii) The CAMPA may also consider evolving

new mechanism to generate additional

sources of fund for forest conservation

works and to create capacity and data base

for better conceptualization and

management of fund."

Having regard to the nature of the functions of the Executive Body of

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the CAMPA, we find substance in the suggestion of learned Amicus Curiae

that there should be more involvement of NGOs by including in the

Executive Body, the conservationists, environmentalists, economists and

experts in forestry. We are of the view that the Executive Body deserves

to be expanded as, presently, only one professional ecologist is its

member, remaining all being officers of the Government. We may note

here that a forthright and fair stand was taken by the learned Solicitor

General not only in regard to the constitution of CAMPA but on other

aspects also, keeping in view the non-adversarial nature of the litigation.

Learned Solicitor General submitted that the Government is committed to

conserve the forest and protect the environments, and would implement, in

letter and spirit, the directions issued by this Court.

In view of above, we direct that clause 2.2 shall be suitably amended

so as to include two more environmentalists, one of whom may be expert

in the field of forest and the other in the field of forest economy

development. These members shall be included in the Executive Body in

consultation with the Chairperson of the CEC.

Regarding clause 6.3(iv), it was suggested that there should be

corporate accounting based on double entry system and auditing should

be conducted by the Comptroller and Auditor-General (CAG). We see

substance in this suggestion as well.

Clause (v) in 6.4 provides that the monies received in CAMPA shall

be used only in that particular State or Union Territory. The clause seems

to be too rigid. Many a times, the effect of degradation of environment or

depletion of forest can be felt more in the adjoining area which may be in a

different State or Union Territory. The effect of environmental degradation

cannot be restricted to a particular area. The impact cannot be limited to

the place of origin. Therefore, we direct that a suitable modification of the

clause shall be made so as to provide that ordinarily expenditure shall be

incurred in the particular State or Union Territory but leaving it to the

discretion of the CAMPA to also incur expenditure in the State or Union

Territory other than the one mentioned in clause 6.2 if it considers it

necessary.

Clause 6.6 which by use of the word 'may' leaves it to the discretion

of the CAMPA to establish Special Performance Vehicle (SPV) for

undertaking compensatory afforestation deserves to be amended so as to

substitute the word 'may' by the word 'shall' so that the regeneration is

done by some SPV in specified areas.

Now, we come to the question of the guiding principle to be laid for

determining the NPV. Reference was made to opinions of various experts

laying down as to what is the concept of NPV and how it is to be

calculated. The question is also about the legal and jurisdictional basis to

levy NPV. Most of the States did not object to the recovery of the NPV

from the user-agency but strenuously urged that since the land under the

forest belongs to the State, the amount deposited by the user-agency as

NPV shall be paid to them. It was also contended on behalf of the States

that there should be no NPV on degraded forest. The further submission

was that all public utility projects shall be exempted from payment of NPV.

On the other hand, relying upon the principles of inter-generational equity

and sustainable development, Mr. Harish Salve, learned senior counsel

and Amicus Curiae contended that forest is a part of eco-system and,

therefore, the value to be put and calculated is not only on trees and

leaves but the basis has to be the preservation of bio-diversity. It is

submitted that NPV is to be levied and collected not because property

rights of the States are affected but on account of effect on ecology by

conversion of forest land for non-forest purpose. Further, Mr. Salve

submits that the basis for calculation of NPV should be the economic

value, spread over a period of 50 years, which would be regenerational

value for forest regeneration to be taken into account as opposed to

restoration value, i.e., financial value. Regarding legal and jurisdictional

basis to levy NPV, Mr. Salve contended that there are various legal

principles which act as source of power to levy NPV. In this regard,

reference has been made to provision of the FC Act, EP Act and Forest

Policy of 1988. It is contended that these enactments and the policy are

the measures taken by the legislature and the Government to discharge

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the constitutional obligation to protect the environments. Reliance is also

placed upon the doctrine of public trust, which learned counsel submits is a

constitutional doctrine.

First, we may consider the meaning of NPV and determine what is

NPV.

The NPV is the present value (PV) of net cash flow from a project,

discounted by the cost of capital.

Forestry is a public project. It is important to bear in mind that a

benefit received today is worth more than that received later. The benefit

received today is in fact 'cost incurred' today. Time value of the cash

inflow/outflow is important in investment appraisal. NPV is a method by

which future expenditures (costs) and benefit are levelised in order to

account for the time value of money. The object behind NPV is to levelise

costs. What is the value of Rupee today would not be the value of Rupee

say 50 years later. For example, let us have the starting point of value of

Rupee in India in the year 2005 and analyse it with the value of Rupee that

may be in the year 2050. Cost incurred or to be incurred in 2050 have to

be discounted by using appropriate parameters like rate of discount,

gestation period, ratio of deflators to GDP. Therefore, expenses incurred

in each year between say 2005 and 2050 have to be brought down to their

present values by using appropriate discount rate in the NPV.

The project like forestry has long gestation period of 40-50 years. It

goes through cost cycles each year depending upon inflation, rate of

interest, internal rate of return etc. Therefore, costs for the year 2005 will

differ from the cost of 2006 and cost of 2006 will differ from that of the year

2007 and so on and so forth. However, this constitutes what is called as

conventional method of accounting cost which does not take into account

social and economic cost of diversion of forest.

Cost is a function of the discount rate (a measure of the value of

capital) used. Under NPV, all costs are discounted to some reference date

which we have taken as 2005 for illustration. The total cost reckoned at

this reference date is the sum of present value or future value of costs

discounted to the year 2005. Similarly, one can calculate the present

value of the revenues from the expected benefits of forest regeneration.

The question then is why charge NPV. In the case of a conventional

project like Hydro-electric Project, the accounting procedure is normally

based on Return On Investment (ROI) in which the unit cost of energy

includes return on capital, investment, depreciation of capital, annual fuel

cost and operational and maintenance costs. However, ROI excludes the

time value of money. It also excludes the gestation period of the project.

Therefore, we have the NPV method which discounts future costs and

future benefits by use of appropriate discount rate and brings down such

costs and benefits to the reference date which in the present case has

been assumed to be the year 2005.

The question, which we have to answer, is concerning the relevance

of fixing appropriate discount rate in valuation of the costs and benefits

arising from forestry as a project.

The value of any asset is discounted by present value of the

economic benefits it will generate in future years. For example, timber

asset value is the discounted future stumpage price for mature timber after

deducting costs of bringing the timber to maturity. NPV is one of the

methods for valuation of standing timber. The general expression V for the

value of an asset, in the base year O, is simply the sum of the net

economic benefits it yields in each year over the life time, T, of the Asset,

discounted to the present value by the discounted rate.

The current method of valuing public sector projects, like forestry,

has become contentious as public sector undertakings agrees for lower

discount rate on account of long gestation period. However, the flaw with

this argument is that the low rate of return is computed without including

the intangible or environmental impacts/benefits emanating from forest.

How does one value the intangibles? There are several methods,

viz, opportunity cost, replacement cost, travel cost, contingent value

method (CVM) and social benefit cost analysis (SBCA).

SBCA can be applied to the evaluation of environmental impacts of

forestry projects. Here, one must appreciate that the environmental

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outputs from forests appear as public goods for which there is no market.

Various environmental outputs can be classified into this category, namely,

Flood Control Benefits

Water Production

Soil Conservation

Outdoor Recreation

Biodiversity & Conservation

Habitat

Air Purification

The problem in valuation of the above outputs is: allocation of fixed

costs according to the contribution of each product in total revenue. This is

because except contribution of timber product, contribution of the other

above-noted outputs is not known, especially intangible outputs. However,

under SBCA, benefits from each of the above environmental outputs are

identifiable. For example, flood control benefits arise because of the role

of forests as stream regulator. Similarly, valuation method for each of the

above outputs differs. In valuing biodiversity, CVM is useful. SBCA is

helpful in placing monetary value on carbon storage on air purification.

The point is that for each of the above functions of the forests,

different methods of valuation have to be applied. Various methods have

been used to estimate the value of environment like CVM, Opportunity

Cost Method, Travel Cost Method, SBCA etc. It would be appropriate if

body of experts examine the aspect and report to this Court suggesting the

best method depending on factors like gestation period, rate of discount

(interest), density of the forest, social benefits of the project undertaken by

PSU etc. They will take into account economic values associated with

forests, viz., direct use values, indirect use values such as value of

environmental benefits from the forest, option values and existence value.

The above discussion shows that NPV helps levelising the costs of

public projects like forestry. It is an important tool of SBCA. Under SBCA,

benefits from each of the above environmental outputs are identifiable.

Hence, applying NPV, one can allocate levelised costs according to the

contribution of each product in the total revenue. It is important to bear in

mind that a benefit or cost received or incurred now is worth more than that

received or incurred later. Therefore, using the appropriate discount rate

helps to aggregate marginal benefits and costs. The choice of interest rate

depends upon time preference. For public project, such as forestry, a

social discount rate, which indicates time preference of the society, should

be used.

Forest sustainability is an integral part of forest management and

policy that also has a unique dominating feature and calls for forest owners

and society to make a long-term (50 years or longer) commitment to

manage the forest for future generation. One of the viewpoints for

sustaining forest is a naturally functioning forest ecosystem. This view

point takes a man and nature relationship to the point of endorsing to, the

extent possible, the notion of letting forest develop and process without

significant human intervention. A strong adoption of the naturalistic value

system that whatever nature does is better than what humans do, this is

almost the "nature dominates man" perspective. Parks and natural reserve

creations; non-intervention in insect, disease and fire process; and

reduction of human activities are typical policy situation. This viewpoint

has been endorsed by 1988 Forest Policy of Government of India.

Yet another viewpoint recognizes the pragmatic reality faced by the

governments and the administrative, namely, trees don't vote while people

do. Some of the criteria reflecting key elements of ecological, economic

and social sustainability are:

1. Conservation of biological diversity.

2. Maintenance of productive capacity of forest

ecosystems.

3. Maintenance of forest ecosystem health and vitality.

4. Conservation and maintenance of soil and water

resources.

5. Maintenance of forest contribution to global carbon

cycles.

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6. Maintenance and enhancement of long-term multiple

socioeconomic benefits to meet the needs of societies.

7. Legal, institutional and economic framework for forest

conservation and sustainable management.

An expert dealing with principles and applications of forest valuation,

on the aspect of value of inputs and outcomes and conditions, says :

"Decision making in forest management requires

that we understand the relative values of inputs,

outcomes, and conditions. Cost values for inputs

such as labour, capital, interest, supplies, legal

advice, trades, and other management activities

as well as the market value of existing timber

stands are relatively easy to obtain. Outcomes or

resulting condition values are more difficult, but

we need measures of the values of timberland,

recreation, water, wildlife, visual amenities,

biodiversity, environmental services, and

ecological process to help guide management

decisions. By understanding market, social and

other values of forests, we can better allocate our

scarce and valuable resources to attain the

desired mix of outcomes and conditions."

The emphasis is on ecosystem, management philosophy that has

greater emphasis on integration, biological diversity and ecological

processes.

In respect of working economic values of the outcome, it is said:

"In real world forest management situations,

decision makers are faced with several

alternatives and potentially large sets of criteria

related to the ecological, economic and social

impacts of these alternatives. It would be very

easy to generate a nearly incomprehensible table

that documented every physical, biological,

economic, and social outcome and condition

resulting from each management alternative.

Such information could include outcome levels for

water yield, sediment production, and timber

growth; population trends for important wildlife

species; and recreation use for backcountry and

developed recreation sites. Similarly, information

on the economic value of these outcomes can be

estimated by means of the methods discussed in

chapter 8 and added to our impact table. To this

avalanche of information, we could add the

impacts on the social well-being of local and

regional communities. The forest management

analyst can easily overwhelm the decision

makers and stakeholders with information."

Dealing with fundamental of decision analyses to achieve ecological,

economic and social goals, it is said that what is to be broadly kept in view

is:

"Ecological and environmental goals are

important to forest managers, landowners, and

their stakeholders, we need information about

how decision alternatives affect such goals.

These goals can be broadly stated as

1. Maintaining and enhancing forest productivity

2. Conservation of biological diversity

3. Protecting and enhancing environmental

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conditions."

The aforesaid also shows that NPV as a tool of SBCA is required to

be based on Total Economic Value (TEV). It indicates the components of

TEV. It further shows what are the type of agency or experts which are

required to examine these issues.

Dealing with co-relation between economics and environmental

management, in 'Environmental Economics in practice' edited by Mr.

Gopal K. Kadekodi in his write up through case studies, answers the

question as to what has economics got to do with environmental

management. The author says that economics is the science of explaining

the behaviour of different agents who take part in production, consumption

and distribution activities in the economy and make decisions regarding

the use of resources. That, environmental economics focuses on market

and non-market behaviour of different agents in the society regarding

natural and environmental resources, viewed from intergenerational, inter-

temporal and different institutional frameworks. (Emphasis supplied by us)

It is further stated that one of the major branches of economic theory

is the 'theory of value'. Economic theory always makes a distinction

between value and price. Answering the question as to why value natural

resources specifically, it is stated that one reason is that there is no market

for ecosystem services such as nutritional cycle, carbon sequestration,

watershed functions, temperature control, soil conservation etc. It is also

stated that assuming there are markets, they do not do their job well. This

market may be regulated one. There may be restrictions on entry as a

result of licensing or rationing introduced by the Government. For the

above reasons, it is concluded that valuation beyond the present is

necessary and for natural resource Accounting NPV method is a must.

Mr. Salve advocates for Total Economic Value (TEV) on the ground

that TEV expresses the full range of value or benefits \026 both tangible and

intangible. Basically, it is understood that natural and environmental

resources provide several 'use values' and 'non-use values' to enhance

human welfare and provide sustainability to all lives (often termed as

anthropogenic values). Conceptually, it is the sum of use values (UV) and

non-use value (NUV) which constitutes the TEV. Further elaborations UV,

option value (OV) non-use value (NUV) etc. have been given. The UV, it is

stated, can be further broadly classified into three groups \026 direct, indirect

and option values. Direct Use Values (DUV) refer to the current use

(consumption) of the resources and services provided directly by natural

and environmental resources. Examples are the use of timber and non-

timber forest products. Recreation (tourism to wildlife sanctuaries or

Himalayan Glaciers, mountains), education, research etc., are examples of

direct non-consumptive use values. Indirect Use Values (IUV) generally

are referred to the ecological functions that natural resource environments

provide. It can be broadly classified into three groups \026 watershed values,

ecosystem services and evolutionary processes. The Optional Value (OV)

is associated with the benefits received by retaining the option of using a

resource (say a river basin) in the future by protecting or preserving it

today, when its future demand and supply is uncertain. Take the example

of the Narmada river basin.

It is not necessary to delve further in this matter since ultimately it

would be for the experts to examine and assist this Court as to the Model

to be adopted for valuation, namely, TEV, CVM, SBCA etc. It is for the

experts to tell us as to what NPV should be applied in case of mines and

different types of forests. We may only note that basis of these valuations

is the theory of sustainable development, i.e., development that meets the

needs of the present without compromising with the ability of future

generations to meet their own needs. Despite various elaborations,

definition of sustainable development, though very old, still is widely

accepted world over and has been reiterated by this Court in catena of

cases.

Regarding the parameters for valuation of loss of forest, we may

only note as to what is stated by Ministry of Environment and Forests,

Government in its handbook laying down guidelines and clarifications upto

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June 2004 while considering the grant of approval under Section 2 of the

FC Act. Dealing with environmental losses (soil erosion, effect on

hydrological cycle, wildlife habitat, microclimate upsetting of ecological

balance), the guidelines provide that though technical judgment would be

primarily applied in determining the losses, as a thumb rule, the

environmental value of one hectare of fully stocked forest (density 1.0)

would be taken as Rs.126.74 lakhs to accrue over a period of 50 years.

The value will reduce with density, for example, if density is 0.4, the value

will work out at Rs.50.696 lakhs. So, if a project which requires

deforestation of 1 hectare of forest of density 0.4 gives monetary returns

worth over Rs.50.696 lakhs over a period of 50 years, may be considered

to give a positive cost benefit ratio. The figure of assumed environmental

value will change if there is an increase in bank rate; the change will be

proportional to percentage increase in the bank rate. Ms. Kanchan

Chopra, while conducting the case study of Keoladeo National Park in

respect of economic valuation of biodiversity at the institute of economic

growth, Delhi as a part of the Capacity 21 project sponsored by the UNDP

and MOEF, Government of India examined the question as to what kind of

values are to be taken into consideration. As per the study, different

components of biodiversity system possess different kinds of value (1) a

commodity value (as for instance the value of grass in a park), (2) an

amenity value (the recreation value of the park) and/or (3) a moral value

(the right of the flora and fauna of the park to exist). It is recognized that it

is difficult to value ecosystem, since it possesses a large number of

characteristic, more than just market oriented ones. It also leads to the

need to carry out bio-diversity valuation both in terms of its market linkage

and the existence value outside the market as considered relevant by a set

of pre-identified stakeholders. It is, however, evident that while working

out bio-diversity valuation, it is not trees and the leaves but is much more.

Various techniques for valuing biodiversity that have been developed to

assess the value of living resources and habitats rich in such resources

have been considered by the author for her case study while considering

the aspect of value, their nature and stakeholders interest. In so far as the

value of ecology function in which the stakeholders or scientists, tourists,

village residents, non-users, the nature of value is \026 regulation of water,

nutrient cycle, flood control. These instances have been noted to highlight

the importance of the biodiversity valuation to protect the environments.

The conclusions and the policy recommendations of the author are:

"Biodiversity valuation has important implications

for decision making with respect to alternative

uses of land, water and biological resources.

Since all value does not get reflected in markets,

its valuation also raises methodological problems

regarding the kinds of value that are being

captured by the particular technique being used.

Simultaneously, in the context of a developing

country, it is important to evolve methods of

management that enable self-financing

mechanisms of conservation. This implies that

biodiversity value for which a market exists must

be taken note of, while simultaneously making

sure that the natural capital inherent in

biodiversity rich areas is preserved and values

which are crucial for some stakeholders but

cannot be expressed in the market are reflected

in societal decision making.

A focus on both the above aspects is

necessary. It is important to take note of the

nature of market demand for aspects of

biodiversity that stakeholders, such as tourists,

express a revealed preference for by way of

paying a price for it. Simultaneously, it is

important to examine the extent to which a

convergence or divergence exists between value

perceptions of this and other categories of

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stakeholders. It is in this spirit that two alternative

methodologies are used here to arrive at an

economic valuation of biodiversity in Keoladeo

National Park. The travel-cost methodology

captures the market-linked values of tourism and

recreation. It throws up the following policy

implications :

1. Keeping in mind the location of the park

and the consequent joint product nature of

its services, cost incurred locally is a better

index of the price paid by tourists. It is

found that demand for tourism services is

fairly insensitive to price. A redistribution of

the benefits and costs of the park through

an increase in entry fee would not affect the

demand for its services.

2. Cross-substitution between different

categories of stakeholders can improve the

financial management of the wetland. A

part of the proceeds can go to the local

management. Also, high-income tourists,

scientists and even non-users with a stake

in preservation can pay for or compensate

low-income stakeholders for possible loss

in welfare due to limits on extraction and

use.

3. However, the limit to such a policy is

determined by the number of visitors and

their possible impact on the health of the

wetland. Such a constraint did not appear

to be operational in the context of the

present park.

Identification and ranking of values of different

aspects of biodiversity resources as perceived

and expressed by different categories of

stakeholders namely scientists, tourists, local

villagers and non-users is an important object in

the process of valuation. In the KNP study, a fair

degree of congruence with respect of ecological

function value and livelihood value is discovered

to exist in the perceptions of diverse groups.

Stakeholders as diverse as scientists, tourists,

local villagers and non-users give high rankings to

these uses."

Next question is to which expert reference shall be made. Counsel

for parties agree that Institute of Medical Economic Growth is an institute

of eminence having been set up about half a century earlier. It has also

been pointed out that this Institute is getting regular maintenance and

development grant from Indian Council of Social Sciences research

(ICSSR). Further, it appears that the Institute is also receiving research

and training grants from Ministry of Finance, Ministry of Health and Family

Welfare and Ministry of Agriculture, besides National Bank for Agriculture

and Rural Development. We have been informed that eminent faculty

members in the institute are engaged in the field of research and

Ms.Kanchan Chopra, (Ph.D. Economics, University of Delhi) is one such

faculty member and her field of specialization is resources and

environmental economics, agriculture and rural development and project

evaluation. The matter deserves to be referred to a committee of experts

in respect whereof we will in latter part of the judgment issue appropriate

directions.

Next, we will deal with the contention of Mr. Venugopal who,

appearing for State of Kerala, submitted that the State has no objection to

the levy of NPV but the amount so received should come to the State.

Referring to Notification dated 23rd April, 2004 constituting CAMPA,

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learned counsel contended that clause 6.4 of the said Notification, which

deals with disbursement of the funds, does not envisage the amount being

disbursed to the State Government. Learned senior counsel also

challenged the constitutional validity of the Notification. The contention put

forth is that the Notification does not have any Parliamentary or Legislative

control. Referring to various clauses of the notification, it was contended

that fund sought to be created under CAMPA lacks accountability and puts

aside financial control. There is a total lack of financial discipline which,

learned counsel contends, is against the constitutional framework. It was

further contended that the forests vest in the Government; the same are

State properties and, therefore, all amounts received shall go to

Consolidated Fund of India or Consolidated Fund of the State or to Public

Funds, as the case may be. Reference has also been made to the

provisions of the Comptroller and Auditor-General (Duties, Powers and

Conditions of Service) Act, 1971 (for short, the 'CAG Act') and the

submission is that no provision under the Notification shows that the

account can be subjected to audit under the CAG Act. The contention, in

short, is that constitutionally it is not permissible to any person or authority

to hold funds collect on behalf of the Government. This is basis for urging

that the Notification dated 23rd April, 2004 is unconstitutional.

For examining the nature of the fund sought to be regulated by

CAMPA, brief reference is necessary to be made to some of constitutional

provisions.

Article 110 in so far as the Parliament is concerned and Article 199

in so far as the State is concerned, while defining Money Bills make a

deeming provision for certain contingencies. Article 110(1)(f) and Article

199(1)(f) read as under:

"110. Definition of "Money Bills".\027(1) For the

purposes of this Chapter, a Bill shall be deemed

to be a Money Bill if it contains only provisions

dealing with all or any of the following matters,

namely :--

(a) to (d) \005.

(f) the receipt of money on account of the

Consolidated Fund of India or the public

account of India or the custody or issue of

such money or the audit of the accounts of

the Union or of a State; or

XXX XXX XXX

199. definition of "Money Bills".\027(1) For the

purposes of this Chapter, a Bill shall be

deemed to be a Money Bill if it contains

only provisions dealing with all or any of the

following matters, namely :

(a) to (d) \005

(f) the receipt of money on account of the

Consolidated Fund of the State or the

public account of the State or the custody

or issue of such money; or"

The contention is that Notification constituting CAMPA shall be

deemed to be a Money Bill.

Articles 294 and 295 deal with succession to property, assets, rights,

liabilities and obligations in certain cases as from the commencement of

the Constitution of India, providing for vesting of the properties and assets

in the Union and in the States. These articles were referred to contend

that forest is the property and asset of the State.

Article 266 deals with Consolidated Fund of India and of the States.

Article 283 deals with custody of the consolidated funds, contingency funds

and the moneys credited to the public accounts. Article 284 deals with

other monies received by public servants in courts and postulates the

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same shall be paid into the public account of India or the public account of

the State, as the case may be.

Article 266(1) deals with all revenues received by the Government of

India, all loans raised by that Government by the issue of treasury bills,

loans or ways and means advances and all moneys received by that

Government in repayment of loans shall form one consolidated fund to be

entitled "the Consolidated Fund of India", and likewise the sum received by

Government of State shall form one consolidated fund to be entitled "the

Consolidated Fund of the State". Article 266(2) stipulates that all other

public moneys received by or on behalf of the Government of India or the

Government of a State shall be credited to the public account of India or

the public account of the State, as the case may be.

Third category of receipt is in terms of Article 284 which is required

to be paid into the public account of India or the public account of the

State, as the case may be.

Chapter III of CAG Act deals with duties and powers of the

Comptroller and Auditor-General. Section 10 thereof deals with

compilation of accounts of Union and the States by CAG. Under Section

11, the CAG is required to prepare and submit accounts to the President,

Governors of State and Administrators of Union Territories having

Legislative Assemblies. Under Section 12, CAG is required to give

information and render assistance to the Union Government and the State

Governments. Section 13 sets out general provisions relating to audit.

Under this provision, it shall be the duty of the CAG to audit all expenditure

from the Consolidated Fund of India and of each State and of each Union

Territory having a Legislative Assembly and to ascertain whether the

moneys shown in the accounts as having been disbursed were legally

available for and applicable to the service or purpose to which they have

been applied or charged and whether the expenditure conforms to the

authority which governs it; to audit all transactions of the Union and of the

State relating to contingency funds and public account; to audit all trading,

manufacturing, profit and loss accounts and balance sheet and other

subsidiary accounts kept in any department of the union or of a State; and

in each case to report on the expenditure, transactions or accounts so

audited by him. Section 14 of CAG Act deals with audit of receipts and

expenditure of bodies and authorities substantially financed from Union or

State revenues. Section 15 provides for the functions of CAG in the case

of the grants or loans given to other authorities or bodies. Section 16

deals with audit of receipts of Union or of States and Section 17 with audit

of accounts of stores and stock. Section 18 provides for the powers of

CAG in connection with audit and accounts. The audit of Government

companies and corporations by CAG is dealt with under Section 19.

Section 20 is in the nature of a residuary provision providing that CAG, if

requested by the President of India or the Governor of the State or the

Administrator of Union of Territory having a Legislative Assembly to

undertake the audit of the accounts of such other body or authority of

which audit has been entrusted to CAG, the CAG shall undertake such

audit. Chapter III shows the responsibility of CAG to conduct audit in the

manner provided in the law or on request made for the audit in the manner

provided under Section 20.

Relying on aforesaid constitutional provisions and also of CAG Act, it

was contended that the notification constituting CAMPA is unconstitutional

as it does not stipulate that the amounts collected on behalf of Government

shall go to the relevant consolidation fund or to public fund. Further, no

provision has been made for audit under the CAT Act. To examine this

contention, it is necessary to determine the nature of Fund dealt with by

CAMPA.

The background under which the fund came to be created has

already been noted. Noticing fast depletion of forests, the fund was

ordered to be utilized for protection of forests and environments. The

environments are not the State property and are national asset. It is the

obligation of all to conserve the environments and for its utilization, it is

necessary to have regard to the principles of sustainable development and

inter-generational equity.

Reverting now specifically to forests, if it becomes necessary for

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economic development to use the same for non-forest purpose, then

before grant of permission for diversion of forest land, there should be

some scheme whereunder loss occurring due to such diversion can be

made up by adopting both short term measures as well as long term

measures one of it being a regeneration programme. Natural regeneration

is a long process. It requires huge amounts. It requires a policy and

direction. It requires proper use of funds for regeneration of depleted forest

and ecology. The natural resources like forests are in trust with the present

generation. In this light, various statutes noted above have been enacted

by the Parliament. Keeping in view the letter and spirit of those statutes

and constitutional provisions, the legality of CAMPA and the power to issue

directions for natural regeneration and utilization of funds is required to be

appreciated. The body set up or fund generated to protect ecology and

provide for regeneration cannot in constitutional scheme of things be

considered and treated as a fund under Article 266 or Article 283 or Article

284 of the Constitution of India. When seen in this light, neither Article 110

nor Article 199 and/or Article 294 or 195 would have any application.

There is an additional reason for the view that NPV will not fall under

Article 110 or 199 or 195 of the Constitution. Our constitution draws a

distinct line between a "TAX" and a "FEE". In case of Ratilal Panachand

Gandhi v. State of Bombay & Ors. [1954 SCR 1055], one of the

questions which arose for determination was regarding constitutional

validity of Section 58 of Bombay Public Trust Act, 1950. That section

makes it obligatory on every Public Trust to pay to the Administration Fund

a contribution at such time and in such manner as may be prescribed.

Under the rules, the contribution was fixed at the rate of 2% per annum

upon the gross annual income of every Public Trust. Failure to pay such

contribution was made liable to penalty under Section 66 of the Act. It was

contended on behalf of the Trustees that the levy of contribution under

Section 58 was in substance the levy of a tax, it was beyond the

competence of the State legislature to enact such a provision. This

argument was rejected by this Court by holding that the Administration

Fund constituted under Section 57 of Bombay Public Trust Act was a

Special Fund which was to be applied exclusively for payment of charges

for expenses incidental to the regulation of Public Trusts and in carrying

into effect the provisions of the Act. Under Section 57 Special Fund vested

in the Charity Commissioner. That Fund was set up from the charges

levied on various Trusts in the State. The Fund was to be managed by the

Charity Commissioner. All investments were to be made by the Charity

Commissioner. All disbursements were to be made by him in the manner

prescribed by the rules. The collections of these charges, deployed in the

Special Fund, were not merged in the general revenue, but these

collections were earmarked and set apart for the purposes of the Act. This

Court further noticed that the Charity Commissioner and the servants

appointed under the Act drew their salary from the Consolidated Fund of

the State. However, this Court observed that Section 57 was enacted to

facilitate the Administration and not with a view to mix up the Fund with the

general revenue collected for government purposes. Therefore, this Court

held that Public Trusts Administration Fund was set up to meet all

expenses of the administration of Trust property within the scheme of the

Act and it is to meet such expenses that they levy was made and

collections were effected. Therefore, this Court held that such payments

were levied for rendering service which the State considers beneficial in

public interest. In the circumstances, it was held that Section 57 and

Section 58 of the 1950 Act were not ultra vires the State legislature

because they did not levy a tax but they levied a fee which came within

Entry 47 of List III of Seventh Schedule to the Constitution, which reads as

under:

"47. Fees in respect of any of the matters in this

List, but not including fees taken in any court."

Thus reading Entry 47 with Entry 20 of the same List, the imposition

of NPV is a charge or a fee which falls within Entry 47 read with Entry 20 of

List III of Seventh Schedule to the Constitution. The Fund set up is a part

"of economic and social planning" which comes within Entry 20 of List III

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and the charge which is levied for that purpose would come under Entry 47

of List III and, therefore, Article 110 is not attracted.

To sustain ecological, economic and social values, in so far as

forests are concerned, primarily, it is a question of Forest Management. In

the introduction chapter of Forest Management, Fourth Edition, co-

authored by Lawrence S. Davis, Professor Emeritus, University of

California-Brakeley, K. Norman Johnson, Orgeon State University, Peter S.

Bettinger, Orgeon State University and Theodore E. Howard, University of

New Hampshire, authors have said that "forest management remains the

attempt to guide forests toward a society's goals. A forest manager is the

catalyst of this effort. As such, the manager needs an earthy

understanding of biological process; a knowledge of animals and their

habitats; an appreciation of streams and their environments; the long-

range viewpoint of a planner; the patience of a labour negotiator, the skills

of an administrator; and the alertness, flexibility and all-round

resourcefulness of a successful business executive. Above all, the forest

manager requires a genuine sense and feeling for the forest as an entity."

This objective is to be borne in mind while considering the question of

ecology as opposed to mere compensatory afforestation. Compensatory

afforestation is only a small portion in the long range efforts in the field of

regeneration. It has been said that recognizing the aforesaid uniqueness

while applying the principles of management is the heart of forest

management.

Forest Management planning involves a blend of ecological,

economic and social systems with the economic and social sides of

planning often just as complex as the ecological sides. Table 1.1 gives

examples of decisions needed in the management of forest as under :

"Table 1.1

Examples of decisions needed in the management of

forests

Type of decision

Example

Extent and distribution of

reserves

Wilderness

Management emphases for

areas where active management

will occur

Big game emphasis, high-

intensity timber production,

scenic areas

Types of activities allowed

Timber harvest, prescribed

fire

Aggregate harvest level over

time

Evenflow, nondeclining

yield

Silvicultural system

Even-aged, uneven-aged

Age structure of forest

Areas by 10-year age

classes

Size and shape of treatment

units

Small units versus large

units

Spatial pattern of treatment units

Concentrated or dispersed

cutting blocks

Protection strategy

Wildfire suppression policy

Vertical and horizontal

diversity/stand density

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Approach to partial cutting

and prescribed burning

Regeneration harvest timing

Rotation age (even-aged),

cutting cycle (uneven-aged)

Regeneration method

Clearcutting, clearcutting

with leave trees,

shelterwood, selection,

prescribed fire, natural

disturbance."

When permission is granted by the Government of India to use the

forest land for non-forest purposes, it is not unconditional. Conditions are

attached mainly with a view to protect the environments and to make good

the loss likely to occur by grant of such permission. The payment into

such a fund or imposition of conditions are for the protection of natural

resources. The Notification dated 23rd April, 2004 sets up a body to which

payment is made so that the said body can carry out the statutory and

constitutional obligations. Since the amount does not go to the accounts

postulated by Article 283, the said provision shall have no application.

Similarly, the provisions of the CAG Act would also have no application. At

the same time, it may be noted that clause 6.3 stipulates the audit through

Chartered Accountants on the panel of CAG. In order to provide for

financial discipline, transparency and accountability, it would be

appropriate to provide for corporate accounting on the principles of double

entry system. We are further of the view that the accounts of the Fund

shall be subjected to internal Statutory Audit, the Statutory Auditors to be

taken from the panel of CAG. The internal audit shall be conducted every

six months.

The duty to preserve natural resources in pristine purity has been

highlighted in M.C. Mehta v. Kamal Nath & Ors. [(1997) 1 SCC 388].

After considering the opinion of various renowned authors and decisions

rendered by other countries as well on environment and ecology, this

Court held that the notion that the public has a right to expect certain lands

and natural areas to retain their natural characteristics is finding its way

into the law of the land. The Court accepted the applicability of public trust

doctrine and held that it was founded on the ideas that certain common

properties such as rivers, sea-shore, forests and the air were held by the

Government in trusteeship for the free and unimpeded use of the general

public. These natural resources have a great importance to the people as

a whole that it would wholly unjustified to make them subject to private

ownership. These resources being a gift of nature, should be made freely

available to everyone irrespective of the status in life. The doctrine enjoins

upon the Government to protect the resources for the enjoyment of the

general public rather than to permit their use for private ownership or

commercial purposes. It was held that our legal system \026 based on

English common law \026 includes the public trust doctrine as part of its

jurisprudence. The State is the trustee of all natural resources which are

by nature meant for public use and enjoyment. Public at large is the

beneficiary of these resources. The State as a trustee is under a legal

duty to protect these natural resources. Summing up the Court said :

"We are fully aware that the issues presented in

this case illustrate the classic struggle between

those members of the public who would preserve

our rivers, forests, parks and open lands in their

pristine purity and those charged with

administrative responsibilities who, under the

pressures of the changing needs of an

increasingly complex society, find it necessary to

encroach to some extent upon open lands

heretofore considered inviolate to change. The

resolution of this conflict in any given case is for

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the legislature and not the courts. If there is a law

made by Parliament or the State Legislatures the

courts can serve as an instrument of determining

legislative intent in the exercise of its powers of

judicial review under the Constitution. But in the

absence of any legislation, the executive acting

under the doctrine of public trust cannot abdicate

the natural resources and convert them into

private ownership, or for commercial use. The

aesthetic use and the pristine glory of the natural

resources, the environment and the ecosystems

of our country cannot be permitted to be eroded

for private, commercial or any other use unless

the courts find it necessary, in good faith, for the

public good and in public interest to encroach

upon the said resources."

In view of above, we hold that the natural resources are not

ownership of any one State or individual, public at large is its beneficiary

and, therefore, the contention of Mr. Venugopal that the amount of NPV

shall be made over to the State Government cannot be accepted.

The Indian Forest Act was enacted to consolidate the law relating to

forests, the transit of forest-produce and the duty leviable on timber and

other forest-produce. The focus of this Act is on the proprietary rights.

Section 3 empowers the State Government to constitute any forest land or

waste land which is the property of the Government or over which the

Government has proprietary rights, or to the whole or any part of the forest

produce of which the Government is entitled in a reserved forest in the

manner provided in the Act. As provided in Section 5, no right can be

acquired over the land in respect whereof notification has been issued

under Section 4. In the manner provided in Section 11, the Forest

Settlement Officer is empowered to acquire the land. Section 20 provides

for declaration of reserved forest. No right in or over a reserved forest can

be acquired, as provided in Section 23. Acts prohibited in respect of

forests have been incorporated in Section 25. Section 29 deals with

declaration of protect forest and Section 30 empowers the State

Government to issue notification reserving trees etc. in a protected forest.

The power of the State Government for protection of forest has been

provided in Section 35. The power to impose duty on timber and other

forest produce is contained in Section 39 of the Act.

From the above, it can be seen that scheme of 1927 Act is a State

management and regulation of the forest. On the assumption that local

communities were incapable of scientific management of forest, the British

Government introduced Forest Policy and Management by setting up a

forest department and enacting the Indian Forest Act, 1878 which was

amended from time to time. By passage of time, it was found that the

provisions of the said Act were not adequate and, thus, in order to

consolidate the law relating to forest, the transit of forest produce and the

duty leviable for timber and other forest produce, the Indian Forest Act,

1927 was enacted. To further tighten the management and regulation, the

FC Act of 1980 was enacted. It became necessary for conservation of

forest on realizing that there has been large scale of deforestation which is

causing ecological imbalance leading to environmental deterioration. This

led to enactment of the FC Act providing for prohibition for use of forest

land for non-forest purpose by anyone including the State Government or

other authorities except with the prior approval of the Central Government.

This legislature was enacted, as already noted, after Forest and Wildlife

were taken out from the State list and placed in the Concurrent list. At the

same time, Article 48A was inserted in the Constitution of India for

protection and improvement of environments and safeguarding forest and

wildlife in the year 1977.

The basis objectives leading to the laying down of the National

Forest Policy, 1988 may also be noted and also the need and requirement

for its enforcement. This policy was framed on realizing that 1952 Forest

Policy for the management of State forest in the country had not halted the

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depletion of forests. It was, therefore, considered necessary to evolve a

fresh policy for future to lay down new strategies of forest conservation

which had become imperative. Conservation includes preservation,

maintenance, sustainable utilization, restoration and enhancement of the

natural environment. The principal aim of the forest policy is to ensure

environmental stability and maintenance of ecological balance including

atmospheric equilibrium which are vital for sustenance of all life forms,

human, animal and plant. The derivation of direct economic benefit must

be subordinated to this principal aim.

The forest policy has a statutory flavour. The non-fulfillment of

aforesaid principle aim would be violative of Articles 14 and 21 of the

Constitution. The basic objectives of the Forest Policy, 1988 are:

"2.1 The basic objectives that should govern the

National Forest Policy are the following:

-- Maintenance of environmental stability

through preservation and, where

necessary, restoration of the ecological

balance that has been adversely disturbed

by serious depletion of the forests of the

country.

-- Conserving the natural heritage of the

country by preserving the remaining natural

forests with the vast variety of flora and

fauna, which represent the remarkable

biological diversity and genetic resources of

the country.

-- Checking soil erosion and denudation in

the catchment areas of rivers, lakes

reservoirs in the interest of soil and water

conservation, for mitigating floods and

droughts and for the retardation of silation

of reservoirs.

-- Checking the extension of sand-dunes in

the desert areas of Rajasthan and along

the coastal tracts.

-- Increasing substantially the forest/tree

cover in the country through massive

afforestation and social forestry

programmes, especially on all denuded,

degraded and unproductive lands.

-- Meeting the requirements of fuelwood,

fodder, minor forest produce and small

timber of the rural and tribal populations.

-- Increasing the productivity of forests to

meet essential national needs.

-- Encouraging efficient utilization of forest

produce and maximum substitution of

wood.

-- Creating a massive people's movement

with the involvement of women, for

achieving these objectives and to minimize

pressure on existing forests.

2.2 The principal aim of Forest Policy must be

to ensure environmental stability and

maintenance of ecological balance

including atmospheric equilibrium which are

vital for sustenance of all life forms, human,

animal and plant. The derivation of direct

economic benefit must be subordinated to

this principal aim."

It has been recognized that one of the essentials for forest

management is the conservation of total biological diversity, the network of

national parks, sanctuaries, biosphere reserves and other protected areas

to be strengthened and extended adequately.

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The strategy under the Forest Policy is to have a minimum of one-

third of the total land area of the country under forest or tree-cover. In the

hills and in mountainous regions, the aim should be to maintain two-third of

the area under such cover in order to prevent erosion and land

degradation and to ensure the stability of the fragile ecosystem. Clause

4.3 lays down the aspects of management of State forests. It would be

instructive to reproduce hereunder certain parts of the Policy with a view to

have clarity of the aim to be achieved.

"4.3.1. Schemes and projects which interfere with

forest that clothe steep slopes, catchments of

rivers, lakes, and reservoirs, geologically unstable

terrain an d such other ecologically sensitive

areas should be severely restricted. Tropical

rain/moist forest, particularly in areas like

Arunachal Pradesh, Kerala, Andaman and

Nicobar Islands should be totally safeguarded.

4.3.2. No forest should be permitted to be worked

without the Government having approved the

management plan, which should be in a

prescribed format and in keeping with the

National Forest Policy. The Central Government

should issue necessary guidelines to the State

Government in this regard and monitor

compliance.

XXX XXX XXX

4.4.1. forest land or land with tree cover should

not be treated merely as a resource readily

available to be utilized for various projects and

programmes, but as a national asset which

requires to be properly safeguarded for providing

sustained benefits to the entire community.

Diversion of forest land for any non-forest

purpose should be subject to the most careful

examinations by specialists from the standpoint of

social and environmental costs and benefits.

Construction of dams and reservoirs, mining and

industrial development and expansion of

agriculture should be consistent with the needs

for conservation of trees and forests. Projects

which involve such diversion should be least

provide in their investment budget, funds for

regeneration/ compensatory afforestation.

4.4.2. Beneficiaries who are allowed mining and

quarrying in forest land and in land covered by

trees should be required to repair and re-vegetate

the area in accordance with established forestry

practice. No mining lease should be granted to

any party, private or public, without a proper mine

management plan appraised from the

environmental angle and enforced by adequate

machinery.

XXX XXX XXX

4.6 Having regard to the symbiotic relationship

between the tribal people and forests, a primary

task of all agencies responsible for forest

management, including the forest development

corporations should be to associate the tribal

people closely in the protection, regeneration and

development of forests as well as to provide

gainful employment to people living in and around

the forest. While safeguarding the customary

rights and interests of such people, forestry

programmes should pay special attention to the

following\027

-- One of the major cause for degradation of

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forest is illegal cutting and removal by

contractors and their labour. In order to put

an end to this practice, contractors should

be replaced by institutions such as tribal

cooperatives, labour cooperatives,

government corporations, etc. as early as

possible;

-- Protection, regeneration and optimum

collection of minor forest produce along

with institutional arrangements for the

marketing of such produce;

-- Development of forest villages on par with

revenue villages;

-- Family-oriented schemes for improving the

status of the tribal beneficiaries; and,

-- Undertaking integrated area development

programmes to meet the needs of the tribal

economy in the around the forest areas,

including the provision of alternative

sources of domestic energy on a

subsidized basis, to reduce pressure on the

existing forest areas.

XXX XXX XXX

4.8.1. Encroachment on forest lands has been on

the increase. This trend has to be arrested and

effective action taken to prevent its continuance.

There should be no regularization of existing

encroachments.

XXX XXX XXX

4.9. The main considerations governing the

establishment of forest-based industries and

supply of raw material to them should be as

follows :

-- As far as possible, a forest-based industry

should raise the raw material needed for

meeting its own requirements, preferably

by establishment of direct relationship

between the factory and the individuals

who can grow the raw material by support

the individuals with inputs including credit,

constant technical advice and finally

harvesting and transport services.

-- No forest-based enterprise, except that at

the village or cottage level, should be

permitted in the future unless it has been

first cleared after a careful scrutiny with

regard to assured availability of raw

material. In any case, the fuel, fodder and

timber requirements of local population

should not be sacrificed for this purpose.

-- Forest-based industries must not only

provide employment to local people on

priority but also involve them fully in raising

trees and raw-material.

-- Natural forests serve as a gene pool

resources and help to maintain ecological

balance. Such forests will not, therefore,

be made available to industries for

undertaking plantation and for any other

activities.

-- Framers, particularly small and marginal

farmers would be encouraged to grow, on

marginal/degraded lands available with

them, wood species required for industries.

These may also be grown along with fuel

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and fodder species on community lands not

required for pasture purposes, and by

forest department/corporations on

degraded forests, not earmarked for natural

regeneration.

-- The practice of supply of forest produce to

industry at concessional prices should

cease. Industry should be encouraged to

use alternative law materials. Import of

wood and wood products should be

liberalized.

-- The above considerations will, however, be

subject to the current policy relating to land

ceiling and land-laws.

XXX XXX XXX

4.16. The objective of this revised Policy cannot

be achieved without the investment of

financial and other resources on a

substantial scale. Such investment is

indeed fully justified considering the

contribution of forests in maintaining

essential ecological processes and life-

support systems and in preserving genetic

diversity. Forest should not be looked upon

as a source of revenue. Forests are a

renewable natural resource. They are a

national asset to be protected and

enhanced for the well being of the people

and the Nation."

It is clearly a constitutional imperative to preserve and enhance

forest cover as a natural gene pool reserve.

As opposed to the above, the ground reality has been depletion of

forest.

The shift in the approach of the legislation is evident from the FC Act

of 1980 when compared with the scheme underlying the Indian Forest Act,

1927 which was State oriented for conserving the Forest Policy of 1952.

Further, in 1977, Forest and Wildlife were taken out from the State list and

incorporated in Concurrent list. Considering compulsions of States and

large depletion of forest, these legislative measures have shifted the

responsibility from States to Centre. Moreover, any threat to the ecology

can lead to violation of right of enjoyment of healthy life guaranteed under

Article 21 which is required to be protected. The Constitution of India

enjoins upon this Court a duty to protect environments.

The aforesaid background has been given to demonstrate that the

object of amount of NPV is to utilize the fund to conserve the ecology

without in any manner affecting proprietary rights of the State Government

over the land, timber or the minerals. The Notification dated 23rd April,

2004 does not deprive any State of any land timber or mineral and,

therefore, there is no question of disbursement of any amount to the State.

The damage to environment is a damage to the country's assets as a

whole. Ecology knows no boundaries. It can have impact on the climate.

The principles and parameters for valuation of the damage have to be

evolved also keeping in view the likely impact of activities on future

generation.

We have already noted that this matter came to be examined on

Central Government filing statement showing the dismal state of affairs of

the forest in the country. It is evident that despite the FC Act and the forest

policy the forests have been rapidly depleting. The forest policy

recognizes this fact and, in fact, was involved to check the menace of fast

eroding of forest in the country. Despite constitutional amendments made

effective from the beginning of 1977 and despite various environmental

laws enacted between 1974-1986 depletion of forest has not halted.

The State of Forest Report 1995 published by Forest Survey of India

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when compared with the State of Forest Report 1997 also shows that there

has been considerable depletion of forest cover. It also shows the limited

regeneration. A comparison of the two reveals that total forest cover of the

country decreased from 638,879 sq.km. to 633,397 sq.km., thus showing a

net loss of 5,482 sq.km. Further it reveals that there has been a net

decrease of 17,777 sq.km. of dense forest cover of the country while open

forests and mangroves have increased by 12,001 sq.km. and 294 sq.km

respectively. The redeeming feature, however, is an improvement which

can be seen from the State of Forest Report 2001. Learned Amicus

Curiae submits that improvement is a result of strict vigil on account of

various orders passed by this Court from time to time. It cannot be

doubted that it is necessary to continue the efforts for regeneration of

forest.

It would also be useful to make a mention of the order dated 22nd

September, 2000 passed by this Court which led to grant of sanction of

rupees 1,000 crores for maintenance of forest under the 12th Finance

Commission (2005-2010). The said order took note of the fact that felling

of the trees is far in excess of what would be justified with reference to

regeneration, and the main cause is non-availability of sufficient funds. It

also notices that even with regard to the felling of trees as per working

plans in the last three years, the corresponding prescription for

regeneration has not been implemented. It further notices that there

cannot be any felling without regeneration because that will, over a period

of time, only result in forest vanishing. Further, the order says that the

shortfall of regeneration which has resulted in depletion of forest cover has

to be made up. The court took note of the suggestion that for regeneration

there should be a joint venture between State of Madhya Pradesh \026 a

State having a large forest area, and the Central Government whereby the

working capital, in whole or substantially the whole, can be provided by the

Central Government and the regeneration of degraded forests carried out.

Taking an overall view, it is important for the nation that in certain areas

where natural forest exists, the same should be preserved and at the same

time the Central Government should consider whether the deficient States

should not be asked to contribute towards the preservation of the existing

forest cover and the compensation/incentive given to the forest rich States

to preserve and regenerate forests. In a sense, there should be a

partnership of all the States to ensure the maintenance and improvement

of forest cover. It was observed that this suggestion should be considered

by a Committee of Secretary (MOF) and the Secretary (MOEF) in

consultation with the Chief Secretaries of all the States.

Para 14.25 of the 12th Finance Commission Report deals with

maintenance of forest. Noticing that several States have represented that

subsequent to the restrictions placed by this Court on exploitation of forest

wealth, the forests have become a net liability for the States rather than a

source of revenue and maintenance of forest has become a problem due

to financial constraints, these States pleaded that separate grant should be

provided for maintenance of forest. Recognising that forest are a national

wealth and the country as a whole has the responsibility in preserving the

said national wealth, the Commission decided to recommend a grant of

rupees 1000 crores spread over the award period 2005-2010 for

maintenance of forest. This would be over and above what the States

have been spending through their forest departments. The amount was

distributed among the States based on their forest area, to be spent for

preservation of forest wealth. In this light, it is not open to the State

Government to contend that the amount of NPV paid by the user agency

shall be handed over to them.

Reference may also be made to report of the Planning Commission

(Chapter IX) relating to forest environments in Tenth Five Year Plan (2002-

2007) which has taken note of the fact that sustainability is not an option

but imperative since without it environmental deterioration and economic

decline will be feeding each other leading to poverty, pollution, poor health,

political upheaval and unrest. Environment cuts across all sectors of

development. The rapid increase in green house gases in the

atmosphere, land degradation, deteriorating conditions of fragile eco

systems, deforestation, loss of biodiversity and environmental pollution

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have become subjects of serious global concern. The overall impact of

these phenomena is likely to result in depletion of ozone layer, change of

climate, rise in sea-level loss of natural resources, reduction in their

productivity ultimately leading to an ecological crisis affecting livelihood

options for development and over all deterioration in quality of life.

From the above report, it follows that the deterioration and

consequently preservation of eco-systems cannot be area or state specific

and that utmost attention is required to be accorded to conservation of

natural resources and for improvement of the status of our environments.

The report notices the need to tackle the environmental degradation in a

holistic manner in order to ensure both economic and environmental

sustainability. Forests play an important role in environmental and

economic sustainability. It takes note of the forests being consistently and

seriously undervalued in economic and social terms. It recognizes that the

economic value of the eco-system services of the forests is vast though it

is extremely difficult to quantify. It takes note of the fact that generally

much of the land-use decision that presently drives forest change takes

relatively little account of these values. The country's forest resource is

under tremendous pressure. Note has been taken of the fact that India's

biological diversity is reflected in the heterogeneity of its forest cover. It is

one of the 12 'mega-diversity' countries of the world. India is also at the

meeting zone of three major zone of three major bio-geographic realms,

namely, the Indo-Malayan (the richest in the world), the Eurasian and Afro-

tropical. India also has the two richest bio-diversity areas, one in the

northeast and the other in the Western Ghats. The biological diversity is

being conserved through a network of biosphere reserves, national parks

and sanctuaries, however, the challenges for conservation emanate from

population pressures, adverse impacts of industrialization and intensifying

threat from illegal trade.

The importance of conserving and managing existing natural forest

and forest soils, which are very large stores of carbon, has been

emphasized as it will significantly reduce greenhouse gas emissions. To

develop and protect forest, a scientific management is necessary so as to

enhance productivity, density and health. Forestry projects have to lay

emphasis on management and rejuvenation of natural forests. The fragile

eco-systems should be properly managed in order to safeguard the

livelihood of millions of people.

The national development agenda must recognize the necessity of

protecting the long-term ecological security. The problem area is the

growing population, high degree of mechanism and steep rise in energy

use which has led to activities that directly or indirectly affect the

sustainability of the environment.

It is recognized that the sustainable use of bio-diversity is

fundamental to ecological sustainable. The loss of bio-diversity stems

from destruction of the habitat, extension of agriculture, filling up of wet

lands, conversion of rich bio-diversity sites for human settlement and

industrial development, destruction of coastal areas and uncontrolled

commercial exploitation. It is thus evident that the preservation of eco-

systems, bio-diversity and environment whether examined on common law

principle or statutory principle or constitutional principle eying from any

angle it is clearly a national issue to be tackled at the national level. All

initiatives are required to seriously pursue.

Dealing with inter-generational justice, it has been rightly observed

that posterity shall not be treated like dirt. In an article published in 2003

Columbia Journal of Environmental Law (28 Colum.J.Envtl.L.185), the

author says that the way in which a society cares or does not care for its

dirt \026 its land \026 reflects the degree to which it cares or does not care for its

own long-term future.

We may also briefly refer to Public Trust doctrine and its applicability

to the matters under consideration. The Public Trust Doctrine looks

beyond the need of the present generation and also suggests that certain

resources are invested with a special nature. It would be instructive to

make a note of a story given in by Timothy Patrick Brady in Boston College

Environmental Affairs Law Review, Spring 1990 under the title 'But most of

it belongs to those yet to be born'. The story relates to digging of well at

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the time of drought. When a Frenchman told villagers of a prudent African

solution of digging well, many villagers agreed but others argued that it will

bring people from other villages and they would bring their cattle and that

would increase the pressure on the already precious water. The

Frenchman told the villagers that why not explain to them that the well is

only for your own village and they can dig their own. It was then said that

'water is not only ours, but is gift of nature from God and must be shared.'

Ultimately, they concluded that it was wiser not to dig the well at all. The

moral of the story is that we are trustees of natural resources which belong

to all including future generation as well. The public trust doctrine has to

be used to protect the right of this as also future generation.

Having regard to the above, amounts under CAMPA have to be

used for regeneration of eco-system and the same cannot be handed over

to any State Government on the premise that ecology is not property of

any State but belongs to all being a gift of nature for entire nation. The

object of the FC Act and EP Act is protection of environments. These Acts

do not deal with any propriety rights of anyone.

As already stated the question as to what amount of NPV is required

to be paid to achieve these object is a matter to be gone into by the

experts. However, the amounts shall have to be updated from time to time

after every three years. For grant of approval under Section 2 of the FC

Act besides payment of NPV as being presently calculated by MOEF, the

user agencies shall have to give undertakings to pay the remaining

amount, if any, pending finalization of determination by the experts.

Turning now to the grant of exemption to certain projects, learned

Solicitor General submitted that Government hospitals, dispensaries, non-

commercial government ventures like schools, rain water harvesting tanks,

sever lines, village roads etc. are the projects meant for public welfare and

have no adverse impact on environment as such and, therefore, these

cases deserve to be granted exemption. Learned Amicus Curiae has no

objection to non-commercial and non-revenue earning Government public

welfare projects being treated differently and granted exemption from the

purview of the payment of NPV. Submission was also made by learned

counsel appearing for some of the parties that other projects like irrigation,

hydro electricity or other similar projects engaged in public welfare and

public utility activities too deserve to be similarly treated and granted

exemption. On behalf of the National Hydro Project Corporation Ltd.

(NHPC), it was submitted that dams/hydro electric projects and other

similar projects are undertaken in public interest and these will also not

create environmental pollution and mere fact of these are revenue earning

projects should not be taken as a ground to treat them differently.

Reliance has been placed on observations made in Hindustan Motors

Ltd. & Anr. v. N.Siva Kumar & Anr. [(2000) 10 SCC 664] to contend that

such a project is not a pollution industry. This decision is not relevant for

determining the question about levy and payment of NPV. The question is

not only about these and projects referred by the Solicitor General not

creating pollution but is about diversion of forest land for non-forest

purpose, thereby depleting forest so as to utilize land area in setting up

these projects. A distinction has to be maintained between a project set up

for providing public utility but which is revenue earning, the category to

which the project of NHPC falls and the government projects of the nature

above referred like hospitals, schools etc., non-revenue earning projects.

A balance is required to be maintained in the development and protection

of environments. As already noted, the development has to be based on

sustainability. If NHPC uses the forest land for non forest purposes, the

payment of NPV is to protect the ecological and bio-diversity having regard

to the doctrines above referred. Generally speaking, projects like NHPC

are commercial ventures.

What we have stated above is also applicable to submissions made

on behalf of Grid Corporation of Orissa (GRIDCO), State of Uttranchal and

State of Madhya Pradesh. We are unable to accept the submission that

wherever the government is the user agency in notified forest area,

protected forest/reserved forest etc., NPV should not be charged. Such a

submission cannot be accepted in the teeth of Section 2 of the FC Act and

other environmental laws noticed hereinbefore.

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The submission made on behalf of the Federation of Indian Mineral

Industries about calculation of NPV at the rate of 10 per cent for major

mineral and 5 per cent for minor mineral as already noted cannot be

accepted. The question is not of the value of the mineral or it being high

value and low volume and mineral of high volume and low value, the

question is about use of the forest areas and need to protect the

environments in the manner above stated. A larger public interest has to

be the guiding principle and not the present interest of user agency only.

We are of the view that the question as to which class of projects

deserve to be exempted can first be examined by experts having regard to

principles laid in this judgment and in receipt of the report from them, this

Court would further examine the matter and issue appropriate directions.

However, prima facie we feel that revenue earning projects do not deserve

similar treatment as non-revenue earning public welfare projects.

We are clear that if let loose, the benefits achieved as indicated in

the State Forest Report of 2001 would be lost and we may be again where

we were in 1990's or 1980's and earlier period during which there was

immense depletion of forest and insignificant regeneration.

The work of regeneration and also of compulsory afforestation

requires special, specific and expert attention and we see no illegality in

establishment of Special Purpose Vehicle (SPV) in terms of clause 6.6

above quoted except that for present till further orders it would be

necessary to monitor the establishment of SPV. Thus, in respect of clause

6.6 in relation to establishment of SPV, we hold that before establishing

SPV, its format shall be filed in Court and SPV shall not be established

without permission of the Court. Further in our view the constitution of

authority (CAMPA) is necessary to fully and effectively implement

recommendation dated 9th August, 2002 made by CEC for protection of

environment

In view of the aforesaid discussion, our conclusions are:

1. Except for government projects like hospitals,

dispensaries and schools referred to in the body of the

judgment, all other projects shall be required to pay

NPV though final decision on this matter will be taken

after receipt of Expert Committee Report.

2. The payment to CAMPA under notification dated 23rd

April, 2004 is constitutional and valid.

3. The amounts are required to be used for achieving

ecological plans and for protecting the environment and

for the regeneration of forest and maintenance of

ecological balance and eco-systems. The payment of

NPV is for protection of environment and not in relation

to any propriety rights.

4. Fund has been created having regard to the principles

of intergenerational justice and to undertake short term

and long-term measures.

5. The NPV has to be worked out on economic principles.

In view of the above, we issue following directions:

A. An expert committee comprising of three experts

including Ms.Kanchan to be appointed within a period of

one month by the Institution of Economic Growth (North

Campus).

B. The committee of experts would examine the following

issues:

(i) To identify and define parameters

(scientific, bio-metric and social) on the

basis of which each of the categories of

values of forest land should be estimated.

(ii) To formulate a practical methodology

applicable to different bio-geographical

zones of India for estimation of the values

in monetary terms in respect of each of the

above categories of forest values.

(iii) To illustratively apply this methodology to

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obtain actual numerical values for different

forest types for each bio-geographical

zone in the country.

(iv) To determine on the basis of established

principles of public finance, who should

pay the costs of restoration and/or

compensation with respect to each

category of values of forests.

(v) Which projects deserve to be exempted

from Payment of NPV.

C. The user agencies shall give undertakings for the

further payment, if any, as may be determined on

receipt of report from the expert body.

D. The Special Purpose Vehicle shall be established with

the permission of the Court.

E. The Institute shall send report of Committee of Experts

within a period of four months.

F. The various clauses of CAMPA shall be suitably

modified in terms of this judgment within a period of one

month.

List after four months.