Forest and Ecology Grants: Way Ahead for the 16th Finance Commission

Climate change is dominating risk analysis across governments and businesses and biodiversity conservation is critical mitigation against it. India through the Forest and Ecology grant has the world’s largest Ecological Fiscal Transfer. As the 16th Finance Commission deliberates it can consider the availability of newer datasets as well as past performance of the grant. We appeal to integration of three principles: Fairness and Equity, Ring-Fencing and Additionality, and Incentivizing Performance. We argue for a more inclusive definition of forest and ecology to include diverse ecosystems like grasslands and deserts. Secondly, we present evidence that communities around ecosystem bear the cost of regulation and thus argue for a separate grant-in-aid for communities around the ecosystems extending the opportunity cost principle to the third tier of governments. Lastly for incentivizing performance we recommend a grant-in-aid for the forest departments of the states who are responsible for maintenance and preservation of these ecosystems.