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Instruments for Sustainable Private Sector Forestry

India Country Study

Indian forestry has been changing over the last decade. The new national forest policy of 1988 and the economic liberalisation programme, which started in 1991, have completely reversed the earlier commercial orientation of forest management to an emphasis on conservation and meeting the subsistence needs of forest-dependent communities. Forest-based industries, used to getting subsidised raw material supplies from government forests, are now expected to meet their needs from non-forest lands by establishing a direct relationship with farmers. In addition, economic liberalisation has exposed the industry to international competition.

The role of the government, which controls most forest lands, has also undergone a significant change. It is now widely recognised that the government alone cannot ensure that forests are sustainably managed, that they provide the goods and services that are demanded of them, and most importantly, that the livelihoods of those dependent on forests are assured and sustainable. Consequently, local communities are being involved in the protection and management of government forests through the Joint Forest Management (JFM) programme, which started on a pilot scale in the early 1990s and has now spread to over 15% of forest lands.

The New Foresters: The role of private enterprise in the Indian forestry sector focuses on the forest resource and the key players – specifically the corporate private sector, farmers, and communities. It analyses the pattern of investment in the forestry sector and scenarios of demand and supply. The specific areas studied are the forest product-based traditional medicine industry, farm forestry and corporate support for it, commercialisation of joint forest management, and the private sector’s involvement in policy development.

The report and substudies highlight the growing realisation that to effectively address the key challenges facing the sector, i.e. continuing forest degradation, the increasing demand-supply gap, and the current paucity of investment, the private sector should be encouraged to play a greater role than it has hitherto played. Whilst the private sector is already a key player, its potential role in achieving sustainable forestry can be enhanced by removing existing bottlenecks and providing some positive incentives.

Company–farmer partnership schemes have demonstrated the potential of farmers participating in such schemes to produce timber for industry and to sell in the open market. These schemes have clearly contributed to the expansion of farm forestry, but both companies and farmers are at the mercy of a potentially volatile and risky market. Recommendations include:

• Ensure clearer bank loan rules and agreements between companies and farmers.
  
  
• Tighten legal provisions for the leasing of farmlands by companies.
  
  
• Use tree farmers’ associations to strengthen farmers’ bargaining power, facilitate companies’ dealings with farmers, and provide economies of scale.

Research and development has emerged as an area where the corporate private sector has a real and demonstrated comparative advantage. Great progress has been made in the development of new clones for which farmers and, in some cases, Forest Development Corporations are prepared to pay a premium. Recommendations include:

• Provide incentives such as tax concessions for investment in research and development.
  
  
• Develop of a system to register clones.
  
  
• Develop of a system to certify tree seeds and clonal planting stock.

Commercial plantations. A large area under plantation is currently being managed by the Forest Development Corporations but both productivity and incentives for improving plantations are low. Recommendations include:

• Involve the corporate private sector in the management of existing commercial plantations along with Forest Development Corporations.
  
  
• Ensure that all fresh plantations are raised using improved planting stock, which can be procured from private sector companies.

Forestry investment is currently inadequate, although recent collective investment enterprises have demonstrated considerable potential (somewhat marred by the subsequent collapse of most schemes). Recommendations include:

• Set up a reforestation fund from a proportion of existing industry taxes.
  
  
• Rural banks should consider long-term forestry loans at concessional rates.
  
  
• Tree growers should be helped to insure their plantations at competitive rates.
  
  
• Incentives for efficient use of raw material should be built into the tax structure.
  
  
• Tax concessions should be granted to those investing in plantation schemes.

Farm forestry. Experience in the 1970s and 80s paves the way for a number of measures that could significantly enhance the potential of individual farmers in certain regions of India to both increase farm-based contributions to industrial wood supply, and improve their own livelihoods. Recommendations include:

• Laws and procedures currently constraining farm forestry, such as felling, transport, and the sale of major farm forestry species, should be removed.
  
  
• The state monopoly on the trade of most commercially important NTFPs should be reviewed.
  
  
• Incentives for tree farming, such as tradable afforestation credits, should be introduced.
  
  
• Consider revoking the ban on exports of wood-based products and a higher duty on import of wood-based raw material in the interests of domestic producers.

Market information is key: the availability of market and remunerative prices are likely to be major factors in determining the future of farm forestry. It is recommended that:

• As more farmers take up farm forestry, a system of market regulation along the lines of agricultural markets needs to be put in place.
  
  
• A suitable market information system, again similar to that of agricultural markets, should also be introduced to inform farmers about major buyers, prevailing prices at different places, trends, procedures, etc.

Joint Forest Management has expanded greatly over the last decade and has demonstrated the potential for communities to take responsibility for managing their forest areas. The focus has been on the management and sharing of largely subsistence benefits. However, production from certain areas under JFM is on the verge of becoming highly commercial. Recommendations include:

• Policies currently constraining commercial production from JFM areas should be reviewed.
  
  
• Meeting the subsistence needs of forest-dependent communities should be stated firmly as the primary objective of JFM areas; only surplus production should be considered for commercial use.
  
  
• Ecologically fragile areas brought under JFM should not be considered as a source of commercial production.
  
  
• The impacts of commercial use should not be biased against the poor.

Ayurvedic medicine industry. Given this large industry’s unorganised nature, obtaining reliable information is difficult, yet there is a widely recognised crisis in the supply of ayurvedic herbs and unsustainable and destructive extraction has been widely reported. Recommendations include:

• An inventory should be carried out of commercially important medicinal plants and a comprehensive survey of the scale of supply and use of medicinal plants.
  
  
• Forest areas from where medicinal plants are extracted should become a key focus for sustainable forest management initiatives.
  
  
• An appropriate legal and policy framework should be developed to control, for example, premature harvesting, product adulteration, and lack of third party validation.
  
  
• Direct links between the processing industry and value addition by primary collectors/ cultivators should be encouraged.
  
  
• Collectors of medicinal plants should organise to reduce the stranglehold of middlemen on the trade.
  
  
• Niche markets should be explored for certified ayurvedic products.
  
  
• Cultivation of medicinal plants should be encouraged, with due application of certification criteria of WHO’s Good Agricultural Practices for ex situ sources.
  
  
• A nodal organisation should be developed at national level to bring together the various stakeholders and issues concerning medicinal plants.

In conclusion, the challenges facing the sector are too great for the forest bureaucracy to handle alone. A loosening of bureaucratic control is crucial for the private sector to contribute more effectively. There is also a need to promote transparency and curb the corruption that plagues forestry, like most other sectors in the country. If the outline recommendations are developed and acted upon, not only can the private sector meet India's forest produce requirements but it could also allow the country to emerge as a major exporter and world player in forestry.

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