Some Methodological and Practical Aspects of Accounting the Returns from Clearfelling Natural Forests in the Evaluation of Intensive Forest Development Projects

The Forest Development Corporations (FDCs) in India have the responsibility of formulating and implementing intensive forest development projects for their respective areas. Since the FDCs operate on the lands currently under natural forests, it is important to decide on the procedure for handling the net returns from clearfelling the natural stands in the project area. The forest development projects prepared under the State Planning Programme included the net returns from clearfelling the natural forests with the benefit streams of man-made forestry. The National Commission on Agriculture, a n umber of foresters and economists have agreed with this procedure. The paper has summarised the arguments behind this procedure. These arguments have been examined and found inconsistent with the generally accepted practices of economic analysis. More importantly, the NCA appears to have contradicted itself while accepting the procedure used in the projects formulated under the State Planning Programme. Some real life problems that have arisen due to this procedure have also been discussed. As an alternative, it is suggested that the returns from natural forests on the project areas be treated as capital assets with the FDCs. The concerned State Government(s) may be deemed to have subscribed to the equity capital of the corporation(s) and when the natural stands are clearfelled and the returns received. This procedure is considered to be conceptually consistent and is expected to save some embarrasment to the FDCs.