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Introduction:

Forests contribute to the livelihoods of more than 1.6 billion


people. Forests and the forest products industry are a source of
economic growth and employment, with the value of global
forest products traded internationally reaching US$270 billion,
of which developing countries account for more than 20
percent. Worldwide, forest industries provide employment (both
formal and informal) for approximately 50 million people.
Forests are home to at least 80 percent of the worlds
remaining terrestrial biodiversity and are a major carbon sink
regulating global climate. Forests also help to maintain the
fertility of the soil, protect watersheds, and reduce the risk of
natural disasters, such as floods and landslides. Global
deforestation and degradation threaten biodiversity, forestrelated ecological services, and rural livelihoods.
Covering 26 percent of the Earths land surface, forests play a
significant role in realizing the Millennium Development Goal
(MDG) of halving the number of people living in absolute
poverty by 2015. Unfortunately, rural development strategies
often neglect forests because forests have been mistakenly
viewed as being outside the mainstream of agricultural
development. In addition to the lumber and wood products
industry, the gathering and marketing of hundreds of forest
products, such as forest fruits, fuelwood, and medicinal
products, constitute an economic activity of enormous scale

The contribution of forests to the maintenance of vital


ecosystem functions and societal well-being is increasingly a
matter of public concern. People are realizing that water supply
and quality, flood protection, soil conservation, local climate,
and conservation of biodiversity all rely on the existence of
functioning forest ecosystems. Most developed-country
governments have now committed to increased funding for
carbon sequestration and effective protection of forest
biodiversity, and these commitments are likely to be extended
to reducing emissions from forest land conversion.

Challenges and opportunities in forest


management in India

Challenges of managing forests in India


Government forests are a source of sustenance to 100 million
forest dwellers as they provide NTFPs, fuel wood and fodder.
Over the past three decades forest degradation but not
deforestation has been the main problem in India, contributing
to both aggravation of environmental deterioration as well as
declining livelihood options for its rural poor. Out of 67 m ha
under the control of forest Department, area with a crown cover
of more than 40% has remained constant at 38 m ha in the last
15 years, although it used to be 46 m ha in the early seventies.
The main controversy in India has been not ownership of
forests, but its objective and management. Should forests be
used for subsistence or for industrial exploitation, and what
should be the form of peoples participation in its
management? Whereas policies in India up to 1988 emphasized
the use of forests for industry and urban users, the current
policy in vogue since 1988 gives primacy to environmental
functions of forests, and satisfying the subsistence needs of the
forest dwellers. Thus forest projects today are seen to perform
an important poverty alleviation function, and are often funded
from budgets meant for rural development.
The case for public management of forests is hinged on a
number of factors (Commander 1986: 9). Firstly, forest
management is associated with a wide range of externalities,
as these provide external benefits to the rest of the ecosystem.
Secondly, FD operatives have often argued that management
of forests requires a level of professional training and scientific
competence that lies outside the capacities of peasants and

forest users (Sham Sunder and Parameswarappa 1987). Thirdly,


the time horizons for forest management would favour public
ownership and public investment. And lastly, it will allow for
major economies of scale and a longer-term planning
framework.
The strong case for exclusive government management gets
diluted because government today is not in a position today to
enforce its property rights. Forests are subject to intense
pressure from human beings, livestock and urban markets.
Over-exploitation by the people which has increased in the last
three decades, is caused by several factors. First, increasing
marginalisation of small landowners has forced them to seek
new avenues of income, like head-loading. Second, as village
commons deteriorated, villagers turned to government forests
for succour. And third, government policies of raising
commercial plantations further alienated the people from the
resource. More than the official revenues which such policies
brought to the government exchequer, it nurtured a new
culture of rent seeking by those in power. The indiscriminate
tree felling by the contractor-official-politician nexus has had a
corrupting influence on the forest dwellers, who also wish to
make hay while the sun shines.
Given the ease of access to forests, indiscipline and sociopolitical culture it has been impossible, in practical terms, for
the Forest Department to enforce its property rights. Thus
exclusive state control for commercial exploitation led to
alienation and these lands, especially protected forests,
became open access, although state control was designed to
prevent this.
These weaknesses in the enforcement of access to government
property have led to forests being over-exploited both by the
industry and the people. They have no stake in its health, their
decisions are guided in terms of current income flows rather
than capturing of delayed returns arising out of protection and
long-term management.

There is enough evidence from around the world that


sustainable production demands extraction only by those with
secure and long-term tenure, both defacto and dejure. Where
users have independent rights to the use of the forest resource,
no user can control the activities of other users, and there is no
organisation to enforce discipline, unrestricted exploitation is
bound to result in degradation of the resource. This will be
particularly true when demand increases because of high price
in the terminal markets.

Opportunities in forestry in India:


The numerous beneficial impacts of forests, particularly with
regard to the impact to land management, are universally
known. Afforestation and reforestation moderate the climate
and precipitation regimes of a given area; prevent soil erosion
and increase the water retention capacity of the land; increase
soil fertility by ensuring the perennial addition of organic matter
to the soil; and thereby both reverse land degradation and

increase its commercial value.


India has about 13 million hectares of fully degraded forests
(see figure below; for the purpose of this article, forest areas
with less than 10% crown cover have been considered fully
degraded), and is in urgent need of both afforestation and
conservation. Unfortunately, the government is unable to
invest the amount of money currently needed to ensure
afforestation and reforestation at the required scale.
A part of this vast problem could be resolved through CDM
forestry projects undertaken by India. Such projects will
provide both the necessary funds and technology to achieve
the goal of increasing CO2 sinks capacity of the Indian
forests. Such afforestation and reforestation activities could
then be continued under the countrys normal forestry
programme.
Efforts to promote CDM projects in the forestry sector would
help fulfill its chief objective: the stabilization of greenhouse
gas concentrations in the atmosphere at a level that would
prevent dangerous anthropogenic interference with the climate
system.
Additionally, these initiatives would fulfill basic conditions
stipulated by the FCCC, namely that such stabilization be
achieved within a time-frame of sufficient length, so that
ecosystems would be enabled to adapt naturally to climate
change; that food production not be threatened; and that
economic development be enabled to proceed in a sustainable
manner.
Afforestation and reforestation activities pursued under CDM
project activities represent an opportunity to abate GHG
emissions in India, since forests possess considerable Co2
fixation potential as well as achieve sustainable development to
help the forest community to improve their quality of life.

The present annual rate of aforestation in India is about 2


million hectares (under various programmes such as social
forestry, watershed development and wasteland
development). CDM aforestation activities undertaken in
degraded forest lands (excluding wastelands) could
significantly increase this rate, while providing the funds and
technological assistance.
Interestingly enough, the capital cost of planting biomass in
degraded forest areas is relatively low compared to the
development of other renewable energy sources. If the areas
to be afforested for CO2 sequestration are not exploited as
energy sources, the required investment level will fall
somewhere between US$100 to 600 per hectare, with an
average of around US$250 per hectare (IPCC1990).
But, even these relatively low levels of investment would
probably exceed the current funding capacity of the Indian
government. Current levels of fund disbursement have only
sustained a net land use change (afforestation minus
deforestation) of 92,500 hectares (1993 estimate). Here again,
the purview of CDM allows for the circumvention of this
problem, for these financial requirements would be met by
monetizing carbon sequestered through CDM afforestation and
reforestation projects.
Therefore, it becomes quite clear that CDM activities in the
forestry sector offer considerable opportunities to reclaim and
afforest degraded forest lands, an important land management
objective. While important issues of national sovereignty and
ownership of afforested areas and participation of local
communities in CDM activities would have to be negotiated
prior to the commencement of the initiatives, the potential
benefits are obvious. Therefore, India should capitalize on the
present CDM initiative in the forestry sector.

Challenges and opportunities in forest


management worldwide

WHY THE POTENTIAL OF FORESTS HAS NOT BEEN FULLY HARNESSED:

Forests house global public goods, which, to be maintained,


must be both protected and managed sustainably. At present,
however, less than 5 percent of tropical forests are being
managed sustainably. Despite their great economic value,
forests are one of developing countries most mismanaged
resources. Many countries with substantial forest resources
have been subject to corruption and serious inadequacies in
forest allocation, administration, and monitoring. Illegal logging
and associated trade and corruption at high levels flourish
because timber rights can be extremely valuable. Furthermore,
growing populations lead to an increase in the conversion of
forests for other land uses (for example, clearing of forests for
agriculture.

Safeguarding global public goods is not a national priority in


countries struggling with problems of poverty reduction. As a
result, forests potential is unexploited in developing countries.
Forest authorities often lack the capacity to implement policy
reforms and programs effectively and have limited capacity to
access, and make use of, extra-budgetary financing.
Furthermore, incentives for the private sector to implement
sustainable forest management are either absent or limited.

UNLOCKING FORESTS POTENTIAL:

The problem of sustainable forest management (SFM) is highly


complex and can only be addressed by a range of actions
targeted at (i) the policy framework, (ii) strengthening of
governance, (iii) removal of market distortions and engaging
market actors, (iv) full valuation and sharing of forest benefits
through market and other mechanisms, (v) capacity building,
and (vi) mobilization of adequate financial resources.
Countering the drivers of deforestation and forest degradation
to enable sustainable forest management will require, among
other factors, greater innovation and better coordination in
global forestry dialogue, national sectoral planning, and
technical analysis that addresses these forces and factors.

Forest law enforcement and governance: Loss and degradation


resulting from weak forest law enforcement and governance
have occurred at the expense not only of national economies,
but also of the rural people who depend on forest resources for
their livelihoods. r. Improvements in forest law enforcement and
governance are critical to capturing the full economic potential
of forests in a sustainable manner.

Private sector engagement: Because of forests significant


commercial value, the private sector is the principal source of
finance in forest production in most countries. Private
investment in the forestry sector in developing countries and
countries in transition is close to US$15 billion per year, or up
to nine times more than the current official development

assistance flows. This trend of increased private engagement in


forest production and processing, legal and regulatory
frameworks that support sustainable forest practices must be
developed to promote responsible private sector investment
and corporate social responsibility as well as to eliminate
corruption.

Increased community engagement in forest management: Local


communities, including indigenous and traditional groups, play
an increasingly important role in forest management. Studies of
the ownership and administration of forests anticipate that
forest areas under recognized community ownership and
reserved for community administration will nearly double
between 2001 and 2015.

Community participation in decision making and


implementation is considered essential for good governance,
equitable distribution of benefits, and sustainable resource
management.

Coexistence of conservation and production: Conservation and


production must coexist for the full potential of forests for
poverty reduction to be realized. Although large areas of the
worlds forests must be preserved intact for their ecological and
cultural values, much of what remains will inevitably be used
for productive purposes. Consequently, a dual approach
covering both protection and productive use is needed .

Improved forest management practices: Improving forest


management practices in production forests (forests where
productive use is permitted) is an essential component of any
strategy to protect vital local environmental services, in
addition to efforts aimed at bolstering the effectiveness of
management within protected areas.

Innovative financing:
It is highly unlikely that governments will be able to
significantly scale down lumber extraction to preserve forests
for their environmental services unless the costs of forgone
revenue can be offset in some way. . Innovative financing
options and markets for forests environmental services, such
as ecotourism, carbon offsets, reduced emissions from
deforestation and degradation (REDD), and watershed
management, will all have important roles to play.

THE WORLD BANKS APPROACH TO THE FOREST


SECTOR
Forests are important to the World Banks mission because of
their contribution to the livelihoods of the poor, the potential
they offer for sustainable economic development, and the
essential global environmental services they provide.

The World Banks 2002 Forests Strategy and Operational Policy:


In 2002 the World Bank adopted a revised Forests Strategy
(World Bank 2004) and Operational Policy on Forests (OP 4.36)
that allow the World Bank to engage more proactively in the
forest sector to help attain the goal of poverty reduction
without jeopardizing forests environmental and economic
values intrinsic to sustainability. The strategy was founded on
three equally important and interrelated pillars:
Harnessing the potential of forests to reduce poverty in a
sustainable manner
Integrating forests more effectively into sustainable
development
Protecting vital local and global environmental services
and values

THE WORLD BANKS LENDING TO THE SECTOR:

The portfolio of the World Banks investments in forests


indicates an upward trend, after having fallen in the early
2000s to historically low levels. The total commitment in 2001
was US$141 million, reflecting lending from the World Bank, the
Global Environment Facility (GEF), and the IFC .

Lending has remained relatively steady in fiscal 2007 (July 1,


2006 to June 30, 2007). Between October 2002 and June 2007,
the World Bank approved 12 stand-alone forestry projects, as
well as 39 others that include forestry components. There are
13 more forestry-related projects in the pipeline, four of which
are stand-alone forestry projects. After adoption of the Forests
Strategy, lending slowed and has only recently regained the
levels preceding the adoption. When forestry investments in
projects associated with other sectors are included (that is,
World Bank projects that do not have a forest sector coding),
aggregate IBRD and IDA investment in the forest sector is much
larger.

By this measure, total investment in forests by the World Bank


was US$770 million after adoption (fiscal 2002 to fiscal 2006).

PROGRESS TO DATE:
In 2006 the World Bank commissioned an independent midterm
review of the Forests Strategy implementation (ContrerasHermosilla and Simula 2007). Some of its main achievements
follow.
Mainstreaming of the strategy.
Successful extension to nontropical forests
Poverty reduction
Strengthening forest sector governance and transparency
Conserving local and global ecosystem services
Facilitating responsible private investment
Building strategic partnerships

Key global challenges:


Address poverty and forest governance by promoting
forest ownership and access rights
Enhance the role of forests as an engine of economic
growth and development.
Protect vital local and global environmental services and
values.
Assist countries to integrate the global forest agenda into
their own national strategies and policies and to harness
the development opportunities available

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