net-present-value-npv-and-the-forest-advisory-committee-fac-th

Context: The Ministry of Mines has requested an expert advisory committee of the Environment Ministry to exempt it from the Supreme Court-mandated fees that prospectors pay when they dig exploratory boreholes in forests.

Analysis

  • The Ministry of Mines argued that “... all areas of exploration are not converted into mining. Only about 1?ses are converted to mining. Considering these, payment of NPV is regarded as an avoidable expenditure. Even payment of NPV at a rate of 2% or 5% is one of the major challenges which leads to delay in the exploration activities.”
  • The Forest Advisory Committee, the Environment Ministry constituted panel, however recommended that the Ministry “may consider charging NPV on borehole basis instead of the present practice of charging 2 or 5% NPV of the total forest area in the lease area.”

Background

Net Present Value (NPV)

  • The Net Present Value (NPV), as it is called, is a monetary approximation of the value that is lost when a piece of forest land has been razed. 
  • This is on the basis of the services and ecological value and there are prescribed formulae for calculating this amount which depends on the location and nature of the forest and the type of industrial enterprise that will replace a particular parcel of forest. 
  • The SC mandates this must be paid by those who use forest land for non-forestry purposes. 
  • The pooled funds -- managed by a central body called the Compensatory Afforestation Management and Planning Authority (campa) -- are then used for afforestation and reforestation. 
  • The Hon’ble Supreme Court in July 2009 issued orders that there will be a Compensatory Afforestation Fund Management and Planning Authority (CAMPA) as National Advisory Council under the chairmanship of the Union Minister of Environment & Forests for monitoring, technical assistance and evaluation of compensatory afforestation activities.

Forest Advisory Committee (FAC)

  • Forest Advisory Committee (FAC) of Ministry of Environment, Forests & Climate Change (MoEF&CC) has been constituted under the Forest (Conservation) Act 1980.
  • It has both official as well as unofficial members, the Director General of Forests as the Chairman. 
  • The FAC is an apex body tasked with adjudicating requests by the industry to raze forest land for commercial use.