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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.