Net Present Value of Forests

  • IASbaba
  • September 18, 2020
  • 0
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Net Present Value of Forests

Part of: GS Prelims and GS-III – Forests

In news

  • The Ministry of Mines has requested the Forest Advisory Committee to exempt digging exploratory boreholes from Net Present Value (NPV).

Important value additions

Net Present Value

  • It is a mandatory one-time payment that a user has to make for diverting forestland for non-forest use, under the Forest (Conservation) Act, 1980.
  • This is calculated on the basis of the services and ecological value of the forests.
  • It depends on the location and nature of the forest and the type of industrial enterprise that will replace a particular parcel of forest.
  • These payments go to the Compensatory Afforestation Fund (CAF) and are used for afforestation and reforestation.
  • Decided by: The Forest Advisory Committee.
  • The Committee is constituted by the Ministry of Environment, Forest and Climate Change (MoEF&CC) and decides on whether forests can be diverted for projects and the NPV to be charged.
  • It is a statutory body constituted by the Forest (Conservation) Act 1980.


  • Some projects have been provided exemption from paying NPV like construction of Schools, Hospitals, village tanks, laying down of optical fibre etc. 
  • Projects like underground mining and wind energy plants have been given a 50% exemption from NPV.

Do you know?

  • In the N. Godavarman Thirumulpad v. Union of India case, 2008, the Supreme Court mandated the payment of NPV.
  • The Kanchan Gupta Committee developed the concept of NPV after this case.
  • Exploratory Boreholes: It is drilled for the purpose of identifying the characteristics, location, quantity and quality of a resource (coal, metal or petroleum). It is a part of prospecting a site for future use for mining and extraction activities.

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