New Delhi, Jan 08, 2026 – In a major policy shift, the Union environment ministry has cleared the way for private and government entities to lease forest land for afforestation and timber projects without paying the previously mandatory environmental compensation fees, marking a significant departure from established forest conservation practices in India.

In a letter dated January 2, sent to state governments, the ministry stated that afforestation and silvicultural activities—the scientific practice of managing forests for growth, quality, and timber production—undertaken under approved state plans will now be treated as “forestry activities.”

What the change entails

With this new classification, afforestation projects conducted under state supervision will now be exempt from compensatory afforestation requirements and net present value (NPV) fees, which are normally imposed on developers to offset the ecological loss caused by diverting forest land. Previously, under the guidelines notified on November 29, 2023, commercial plantations of low-rotation or medicinal crops on forest land were considered “non-forestry activities,” requiring specific central government approval and full payment of environmental compensation fees.

The ministry clarified that as long as these afforestation projects follow a detailed project report (DPR) and are supervised by the state forest department, the usual penalties for forest land diversion will not apply. States have also been given the flexibility to devise revenue-sharing arrangements with private or government entities involved in these projects on a case-by-case basis.

The projects must operate under an approved working plan, which specifies the species to be planted, sustainable harvesting practices, and management guidelines, ensuring that afforestation is scientifically managed and aligns with broader forestry objectives.

Context and rationale

According to sources familiar with the matter, the ministry received multiple representations from stakeholders seeking permission to undertake afforestation in degraded landscapes, which could be utilized for timber or other forestry purposes under state supervision. Previously, the provisions of paragraph 14 of the 2023 guidelines restricted both state and central agencies from raising plantations or low-rotation crops on forest land, hindering restoration and commercial forestry initiatives.

Officials noted that the old restrictions could increase India’s dependence on imports of pulp, paper, and timber, limiting domestic forestry production.

Criticism and concerns

Despite the ministry framing the change as a step to facilitate afforestation and ecosystem restoration, critics argue that the reclassification opens up public forest lands to potential commercial exploitation.

Senior Congress leader Jairam Ramesh condemned the move, linking it to the 2023 amendments to the Forest (Conservation) Act, 1980. Writing on social media platform X, Ramesh stated, “In August 2023, the Modi Government had bulldozed amendments to the Forest (Conservation) Act. Critics had warned the changes would facilitate the privatisation of forest management, and this January 2 circular proves it.”

Legal and environmental background

Compensatory afforestation is a standard requirement for diverting forest land for non-forest use, such as infrastructure or mining projects. Developers are obligated to fund the creation of new forests to replace lost trees and land, following the principle of “land by land, trees by trees.”

Net Present Value (NPV) fees, mandated by a Supreme Court order in 2002, quantify the loss of ecosystem services such as carbon sequestration, soil protection, and biodiversity conservation caused by forest diversion. The exemption from NPV and compensatory afforestation, therefore, represents a significant departure from long-standing conservation norms.

Recent policy trajectory

The January 2 circular follows several recent steps by the ministry to incentivize commercial and ecological forestry. These include the 2023 renaming of the forest law to the Van (Sanrakshan Evam Samvardhan) Adhiniyam, notifications regarding Green Credits, and guidelines for using degraded forest land to meet afforestation obligations for industrial projects. The August 29 and 31, 2023 notifications outlined market-based mechanisms for environmental restoration, allowing private and public entities to undertake afforestation projects in degraded forest areas.

As a result, the new circular marks a key milestone in India’s forest management and afforestation policy, with long-term implications for commercial forestry, ecological restoration, and forest governance.