Short Note: Diversion of Forest Land – New Cost-Benefit Analysis Guidelines

What are the new cost benefit analysis guidelines of the environment ministry towards diversion of forest lands into non-forest?

Till now the cost-benefit analysis was done on the basis of guidelines of 2004 in which Net Present Value of forest was not considered. Now the Ministry of Environment, Forest and Climate Change has come up with new guidelines for cost-benefit analysis of any project that involves diversion of forest land. It may reduce the economic viability of the developmental project as it will include number of new costs for diversion of forest land such as possession costs and habitat fragmentation costs.

In the new guidelines the cost of diverting forest land will be estimated when Net Present Value (NPV) is accessed. There is new formula for NPV and the new addition to diversion cost will be as follows:

  • 30% of NPV will be added to diversion cost as the cost of Possession of Forest Land and
  • Additional 50% of NPV will be added to diversion cost as the cost of habitat fragmentation cost
  • Another 10% of NPV will be added to diversion cost as loss of animal husbandry productivity and soil moisture conservation costs.

The new cost benefit guidelines takes account of various ecological services such as nutrients in the soil, water recharge, carbon sequestration etc other than new additions such as possession cost and habitat fragmentation cost.

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