Finance Commission support forest conservation in India

Source: The post Finance Commission support forest conservation in India has been created, based on the article “To combat climate challenges, the Finance Commission needs to step up” published in “Indian Express” on 13th January 2024.

UPSC Syllabus Topic: GS paper 3- environment – conservation and GS paper 2- polity- devolution of powers and finances up to local levels.

News: This article discusses how India’s Finance Commission (FC) helps states improve and maintain their forests to fight climate change.

How does the Finance Commission support forest conservation in India?

Progressive Increase in Financial Allocations: The Finance Commission has significantly increased funding for forest conservation over time. Starting with Rs 1,000 crore in the 12th FC, it was raised to Rs 5,000 crore by the 13th FC. The 14th FC further enhanced the focus by dedicating 7.5% of the central tax pool to forests and ecology. The 15th FC then increased this share to 10%, demonstrating a clear upward trend in financial commitment.

Largest Payment for Ecosystem Services: By the time of the 15th FC, the amount mobilized and distributed to states exceeded Rs 4.5 lakh crore, making it the world’s largest Payment for Ecosystem Services (PES) system.

Alignment with National Climate Goals: The increasing financial allocations by the Finance Commission support India’s commitments under the Paris Agreement. India aims to reduce its greenhouse gas emissions by 33-35% and develop an additional carbon sink of 2.5 to 3 billion tonnes of CO2 by 2030. This strategic funding helps achieve these targets by incentivizing states to improve and maintain their forest cover.

What are the challenges in forest conservation?

High Opportunity Costs: Forest conservation often comes with significant opportunity costs, which can be large or even prohibitive for some states, impacting their revenue and expenditure.

Balancing Economic and Environmental Needs: There is a challenge in balancing the necessity of economic growth with the imperatives of environmental conservation.

Dealing with Specific Environmental Issues: Addressing specific problems like crop burning and increasing forest fires, which are not part of the natural regenerative cycle but a result of climate change, requires dedicated funds and innovative solutions.

Variability in Climate Vulnerability: Different regions in India face varying levels of climate vulnerability, necessitating tailored approaches to forest conservation and management.

What opportunities can the 16th Finance Commission explore?

Incorporating Climate Parameters in Tax Distribution: The 16th Finance Commission can make climate vulnerability and emission intensity a key part of the tax devolution formula, nudging states towards achieving India’s National Determined Contributions (NDCs) under the Paris Agreement.

Performance-Based Grants for Specific Sectors: It can provide performance-based grants for sectors crucial to emissions reduction, such as clean energy, sustainable land, and forest management, aligning with India’s NDCs and Sustainable Development Goals (SDGs).

Innovations for Environmental Challenges: The Commission can fund innovations to address specific problems like crop burning and mangrove restoration, vital in the face of increasing forest fires and weather-induced floods.

Scientific Data-Driven Fund Allocation: Utilizing remote sensing data and pollution inventories to assess ecosystem degradation can help in designing a performance-based system for efficient and targeted fund allocation.

For more information on 16th FC read here

Question for practice:

Evaluate the impact of the Finance Commission’s financial allocations on forest conservation in India, considering the challenges and opportunities mentioned in the article.