How useful would additional green taxes be in India?

In a flip-flop of sorts, the central government disowned a draft national forest policy last month after first uploading it on the environment ministry’s website and inviting public comments on the same. Among other things, the draft policy discussed the possibility of levying an environmental cess, green tax or carbon tax. The policy states, “Environmental cess, green tax, carbon tax, etc., may be levied on certain products and services for facilitating ecologically responsible behaviour, garnering citizens’ contribution and supplementing financial resources.” How effective would an additional green tax or cess be in furthering environmental protection in India?

To be sure, the proposed additional tax would not be the first of its kind in India. Under the Forest Conservation Act, 1980, any entity that diverts forest land for non-forest purposes is required to provide financial compensation for the purpose of afforestation in non-forest or degraded land, in order to compensate for the loss of forest cover. In 2002, the Supreme Court had directed that a Compensatory Afforestation Fund (CAF) should be created to manage the funds generated. Similarly, India’s Clean Environment Cess or coal cess acts as a carbon tax. The coal cess is levied on coal, lignite and peat at the rate of ₹ 400 per tonne, and the funds raised are managed by the National Clean Environment Fund (NCEF), which was known as the National Clean Energy Fund earlier.

While the government is prompt in collecting such taxes, it seems to have a lackadaisical approach in utilizing them for stated goals. Substantial resources have been diverted from the NCEF towards myriad government schemes though it was originally instituted to fund research and development in the field of clean energy technologies. Consider this: in 2014-15, about half of the money disbursed from the fund was directed towards the National Ganga Mission. A detailed list of projects recommended for NCEF funding available since 2011 shows that most of the money has been directed towards various government missions such as the Green India Mission, the Jawaharlal Nehru National Solar Mission, installation of solar photovoltaic plants or solar water heater systems, etc. A large part of the fund is also lying unutilized. Gyan Ranjan Panda, assistant professor of economics at Central University of Rajasthan, who co-authored a paper on performance of NCEF in the Economic and Political Weekly, said the use of NCEF money to provide for budgetary shortfall in any environment-related programme is defeating its original purpose, which was to provide loans or viability gap funding for new renewable technologies.

Even afforestation efforts seem to be suffering from a similar situation. A bill to establish a National Compensatory Afforestation Fund under the Public Account of India and a State Compensatory Afforestation Fund under the public account of each state is currently pending with the Rajya Sabha. Currently, an ad hoc body called Compensatory Afforestation Fund Management and Planning Authority (CAMPA) is in charge of the funds generated for afforestation purposes. According to a report of the Comptroller and Auditor General (CAG) of India, between 2006 and 2012, funds with CAMPA grew nearly 20 times, from ₹ 1,200 crore to ₹ 23,608 crore. However, this has not translated into a concomitant increase in funding afforestation efforts. Less than 5% of the money has been devolved to the states, as was made known by then environment minister Prakash Javadekar while replying to a Lok Sabha question last year (Lok Sabha Starred Question number 117 answered on 28 July 2015).

What is interesting is even this paltry devolution of funds has been able to achieve 80% of the afforestation target in the country. The time period for assessing whether or not targets have been met is not identical for each state. In fact, for some, no period has been given at all.

These numbers seem to suggest a huge improvement in our afforestation performance in a very short period. In 2013, the CAG had pointed out in a detailed audit report that the total afforested area in the country was slightly more than 57,000 hectares (7,281 hectares of non-forest land and 49,733 hectares of degraded forest land). The audit looked at the period between 2006 and 2012. According the Javadekar’s reply in the Lok Sabha, this area jumped by more than 13 times to 674,749 hectares (non-forest and degraded forest combined) in 2015.

Are such unaudited claims realistic? Experts call for observing caution. Kanchi Kohli, legal research director with the Centre for Policy Research’s Namati Environment Justice Programme, said ground verification is necessary to ascertain the authenticity of figures related to forest diversion as well as compensatory afforestation. Neema Pathak Broome, an environmentalist with environmental action group Kalpavriksh, said while there is certainly a momentum for afforestation drives, such massive change does not show on the ground. Also, the intention behind such enthusiasm for afforestation might be driven for reasons completely different from environmental protection. State governments in Odisha and Andhra Pradesh have been carrying out plantation drives on common land being used by people for shifting cultivation to wrest control of the land rather than increase forest cover, Broome added.

The fact that afforestation efforts suffer from abysmally low survival rate of plants—Javadekar admitted it was at 10%—also lends support to the theory that India’s afforestation effort is either grossly inefficient or used as an excuse for evicting people from common property resources. According to news reports, the discarded forest policy also had provisions to facilitate the latter goal.

Whether or not the government introduces an additional green tax in its next forest policy is a matter of speculation. However, existing evidence shows that the utilisation of even currently available fiscal resources for furthering India’s environmental and afforestation efforts leave much to be desired.