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6. Impact of incentives on the development of forest plantation resources in India - S.K. Pande[47] and Devendra Pandey[48]


Geographic and economic background

With an area of 328.72 million ha, India is the seventh largest country in the world. It shares borders with Bangladesh, Bhutan, China, Myanmar, Nepal and Pakistan. The climatic and topographic features are diverse. The country is bounded by the Great Himalayas in the north, the Indian Ocean in the south and transversed by the Tropic of Cancer in the centre. The country can be divided into broad four regions - the great mountain zone; the plains formed by the Indus, Ganges and Brahamputra rivers; the desert region; and the southern Peninsula. The alluvial plains of the Ganges and Indus (with their tributaries) are the most fertile and densely populated lands. The country is divided administratively into 28 states and seven centrally administered territories.

Agriculture is the dominant land use and covers about 143 million ha (43 percent of the total land area). The total forest cover is 63.7 million ha, which constitutes 19.4 percent of the total land area (FSI 2000). In addition, scrub, which has a crown density of less than ten percent, occupies about 5.2 million ha. The tropical dry and moist deciduous forests make up about 70 percent of the forest cover (FSI 1987). Other forest types occupying significant areas include tropical rain forests, montane subtropical and temperate forests. The distribution of forests across the country is highly uneven (FSI 2000). Details of land use in India are shown in Table 1.

Table 1: Land uses in India

Land-use category

Area (million ha)


Net shown area (agriculture)



Forest (legal)



Cultivable wasteland






Miscellaneous tree crops and groves



Urban and developmental use



Uncultivable wasteland and others



Fallow land






Source: NFAP (1999)

The area of land legally designated as forest land does not tally with actual forest cover because it includes barren lands that have been legally classified as forests. Cultivable wastelands and fallow lands are areas that have the potential to grow crops but have remained fallow for many years. On uncultivable wastelands (for example, water bodies, rocks, mountains and deserts), biomass production is impossible.

India’s population is 1.03 billion, of which 741 million (72 percent) reside in rural areas (Census India 2001). With 324 persons/km2, India is one of the most densely populated countries in the world. To ensure food security, productivity has been increased through improved technologies and more efficient irrigation facilities. The area under agriculture increased from 118 million ha to 143 million ha during the second half of the twentieth century. The per capita forest area is only 0.06 ha. Small-scale and marginal farmers, who constitute 78 percent of the farming community, possess only 32 percent of the operational land (Table 2). The cattle population of the country increased from 252 million head in 1951 to 445 million head in 1992, of which approximately 30 percent grazed in the forests. The forests in India are, therefore, under tremendous pressure.

Table 2: Distribution of operational landholdings in India, 1990/1991

Category of holdings

No. of holdings (million)

Area (million ha)

Average size (ha)

Marginal (< 1 ha)

63.4 (59.4%)

24.9 (15%)


Small (1-2 ha)

20.1 (18.8%)

28.8 (17.4%)


Semi-medium (2-4 ha)

13.9 (13.1%)

38.4 (23.2%)


Medium (4-10 ha)

7.6 (7.1%)

44.7 (27.0%)


Large (> 10 ha)

1.7 (1.6%)

28.7 (17.4%)



106.7 (100%)

165.5 (100%)


Source: Anon (2000)

Concerned with the depletion of the forest resource, the Government of India (GoI) enacted the Forest (Conservation) Act 1980, which prohibited the conversion of forest land without approval of the federal government. One of the essential conditions for approving any conversion stipulated the afforestation of an equivalent non-forest area to compensate for the loss of forest area. Since 1980, the rate of deforestation has slowed considerably. In addition, tree cutting has virtually ceased in seven northeastern states due to judicial interventions. No tree cutting in the forests can be carried out without a management plan approved by the GoI.

Economic and social contributions of forestry and the forest policy

Forests in India play an important role in the country’s economic development. Besides producing raw materials for industries, forestry generates employment in the primary, secondary and tertiary sectors (NFAP 1999). Forests also provide materials for villagers (for example, small timber and non-timber forest products) and grazing land for livestock. About 200 million rural people living in and around forests are wholly or partially dependent on forest resources for their livelihoods (Anon 2001). Forests used to contribute significantly to the country’s exports until 1978 when exports were scaled down. The official forestry sector’s contribution to the gross domestic product (GDP) is low due to the undervaluation of a wide range of forest products and services. Over the years, this has ranged between 1.1 and 2.9 percent of the total GDP, and a decline since 1996 is primarily due to a ban on logging in most natural forests.

The current National Forest Policy (1988) focuses on conservation. The policy emphasizes environmental stability and maintenance of the ecological balance. The derivation of direct economic benefits is subordinate to this aim. For biodiversity conservation, a protected area network - consisting of national parks, sanctuaries, biosphere reserves and other protected areas - has been strengthened, and 15.6 million ha forest have been brought under its purview.

The policy lays heavy emphasis on meeting the requirements of fuelwood, fodder, non-timber forest products and small timber for rural and tribal people who have been given priority over the raw material requirements of forest-based industries. The latter have been advised to meet their own needs by dealing directly with farmers who can grow trees. It has been clearly enunciated that natural forest areas, even if these are degraded, will not be made available or leased to industries for creating industrial plantations (MoEF 1988).

Role of the public and private sectors in forestry

Almost all of the natural forests, including large-scale forest plantations lying within forest reserves, are owned and managed by the government through the state forest departments. They are required to prepare a working plan for managing each administrative unit (Forest Division), including protection, harvesting of timber and other products.

The private sector (that is, farmers, individuals, wood-based industries and entrepreneurs) has established only small-scale and scattered plantations. The land ceiling laws forbid the holding of large areas (maximum: 21.85 ha) by the private sector (Table 3). It is thus difficult for private industries to raise commercially viable plantations.

Table 3: Ceiling limits on landholdings in India


Irrigated (two crops)

Irrigated (one crop)

Dry land

Andhra Pradesh




















Himachal Pradesh




Jammu and Kashmir












Madhya Pradesh
























Tamil Nadu












Uttar Pradesh




West Bengal




National guidelines on ceiling (1972)




Source: Anon (2000)

In general, private individuals, industries and foreign investors do not find the existing policy environment conducive for plantation development. On the other hand, since the mid-1990s, the GoI has promoted people’s participation in protecting, managing and developing the forests to address the problem of rehabilitating degraded forests and wastelands.

Current wood production

Due to the increasing emphasis on forest conservation, the production of industrial wood from natural forests has gradually declined over the last two decades. Collection of fuelwood from forests by local people continues unabated. Logging in natural forests has been gradually restricted since 1982 when felling of trees above 1 000 m above sea level was banned in some states. The data on production and consumption of forest products are incomplete and unreliable. The annual production of industrial wood during the 1970s was about ten million m3 (NCA 1976), which had gradually declined to about three million m3 in 1999 (ICFRE 2000). On the other hand, production of industrial wood from trees outside the forests and private plantations has increased (Table 4).

Table 4: Production of timber and fuelwood in India, 1996

Forest product




12 million m3


31 million m3

Farm forestry and other wooded lands


101 million tonnes


98 million tonnes

Farm forestry and other wooded lands

Source: Rai and Chakrabarti (1996)


Teak (Tectona grandis) was used to establish the first plantation in India in 1840 at Nilambur in Kerala State. Regular planting, mainly of teak, commenced in 1865 in many central and southern states. Eucalyptus was introduced in the Nilgiri Hills of the present Tamil Nadu State in 1858. Plantation development of other native species accelerated after the taungya (agroforestry) system was introduced in 1911. By 1950, the total area under forest plantations had reached 29 210 ha (NCA 1976).

Planned afforestation for soil conservation and production of industrial wood, fuelwood and fodder started slowly in the late 1950s. Industrial plantations were raised mainly within the forest reserves after clear-felling of the economically less important forests. The practice continued up to the Fifth Five Year Plan (1974-1979). Until then, most plantations were of teak, sal (Shorea robusta), deodar (Cedrus deodara), chir pine (Pinus roxburghii), eucalypts and acacias. The annual planting rate between 1956 and 1979 ranged from 62 000 to 244 000 ha. By 1979, the total plantation area had reached 3.33 million ha. A shortage of financial resources was one of the main factors limiting forest plantation development.

The establishment of the Forest Development Corporations in the states and launching of numerous donor-assisted social forestry projects led to a considerable expansion of plantations after 1979. While the Forest Development Corporations continued planting industrially important species, plantations under social forestry schemes were mostly established outside forest reserves, along railways, roads and canals, government-owned wastelands, and on private farmlands with short-rotation species. In the 20-Point Programme for the development of the country, the GoI declared tree planting a priority. Annual planting rates increased to about one million ha between 1980 and 1985. The Union Ministry of Environment and Forests (established in 1984) created a National Wasteland Development Board (NWDB) in 1985 to give further impetus to plantation development. The annual planting rate increased to 1.78 million ha between 1985 and 1990.

Since 1991, it has slightly declined to 1.5 million ha due to the termination of many externally funded projects and lack of funds from the central government. The area planted in the Sixth (1979-1984), Seventh (1984-1989) and Eighth (1989-1994)[49] Plans was 4.65 million ha, 8.86 million ha and 7.95 million ha, respectively (Figure 1). The total area planted between 1951 and 1999 was 31.21 million ha (NAEB 1999).

Source: FSI (2000)

Figure 1: Annual plantation rate between 1951 and 1999

Between 1980 and 1990, the indicator for assessing progress in plantation development was “number of seedlings planted”, whether in block planting or linear formation. This figure was then converted into a “notional” area estimate, using a norm of 2 000 seedlings/ha, to arrive at the total plantation area at the national level. Since 1990, the planting targets have been divided into area coverage (block planting) and number of seedlings planted in linear patterns. To date, the same approach is adopted to convert seedlings distributed to private individuals and institutions. The planted area reported by the National Afforestation and Eco-development Board (NAEB), a new agency created by re-organizing the NWDB, under the Union Ministry of Environment and Forests, has two components: area of block plantations and notional area. About 35 to 40 percent of the total annual plantations are classified as notional areas. Of the total plantation area of 31.21 million ha, 10.26 million ha were planted with seedlings distributed to individuals, farmers, public and private institutions after 1980 (FSI 2000). The distribution of free seedlings boosted tree plantations by small-scale landholders, who also benefited from the extension services and technical guidance provided by the forest departments. The supplementary cash income derived from the sale of trees, in addition to recurring agricultural incomes, has been the main motivating factor for farmers.

Plantation development in India can be divided into three phases. The first phase started with the first Five-year Development Plan (1951-1956) and ended in 1978. Progress during this phase was slow. The second phase (1979-1992) saw a considerable expansion of areas planted due to the implementation of social forestry projects and the national commitment to rehabilitate wastelands. The National Forestry Policy (1952) was revised during this period. A small number of wood-based enterprises began raising quality seedlings and launched incentive schemes to attract farmers to plant trees. This approach was replicated by many other enterprises during the third phase. The beginning of the third phase (1992 to present) was marked by the end of donor-supported projects, a more active role of the private sector in supporting farmers and a shift in focus from social forestry to Joint Forest Management (JFM). Many activities of the second phase overlap the third phase.


After India attained independence in 1947, the government focused on developing infrastructure and industries. Forestry was not a priority sector. Although forest lands, which included treeless areas, covered about 23 percent of the total land area, the allocation of funds to the forestry sector in the national developments plans ranged only between 0.26 and 0.61 percent of the total budget allocations between 1951 and 1979. In contrast, the agriculture sector, which covered about 43 percent of the land area, received fund allocations of up to 17 percent. Government investments in forest plantations were limited to plantations of industrially important indigenous species, and of eucalyptus, within forest reserves and on degraded sites for soil and water conservation.

The National Forest Policy (1952) identified natural forests as the prime source of industrial timber. Scientific management was emphasized to produce sustainable supplies of wood for the industries. Tree planting by private entities, governmental agencies and local authorities was emphasized mainly for environmental reasons. Tree plantations established outside the forests were limited to homesteads and farms. In some states, farmers planted rubber, coconut and cashew trees. The state forest departments were expected to raise awareness, and provide (i) seeds and seedlings of suitable species and (ii) technical guidance (MFA 1952). The available budget for all these activities was limited.

Research on forest plantations was confined to government forestry research institutions. Moreover, studies focused on industrially important species (for example, teak), fast-growing exotic species (for example, eucalyptus, pines and poplars), nursery techniques, growth yield, spacing and silvicultural aspects.

The tangible incentives were seedlings distributed by the forest departments either free-of-charge or via subsidized rates (about ten percent of the production costs), particularly during the celebration of Van Mahotsva (the tree planting festival). Seedlings were distributed for about one week to one month per year during the rainy season. The occasion of Van Mahotsva was used to raise awareness about planting trees. Events were mainly organized in schools, colleges and other institutions. The ritual made little impact on developing a viable resource for wood production, but the number of trees along roads increased visibly.


Investment climate and initiatives for plantations

The establishment of the National Commission on Agriculture (NCA) marked the turning point in plantation development. The NCA realized the potential of plantations in meeting India’s industrial and fuelwood needs, and pointed out the lack of investment in the sector (NCA 1976). Based on the NCA’s interim report on production forestry, Forest Development Corporations (FDCs) were set up by many state governments as fully state-owned companies to support tree growing. A major task of the FDCs was to establish plantations with industrially important timber species on forest land after clear-felling. The FDCs leased forest lands on a long-term basis with the provision to receive institutional finance from the former Agricultural Refinance and Development Corporation, now the National Bank for Agriculture and Rural Development (NABARD). Due to the inherent risks involved in forest plantation management, commercial bankers were reluctant to finance the undertakings. The NABARD provided loans to the FDCs, which covered half of the financial costs required for different activities. Of the 26 FDCs that existed until 1990, only seven[50] were involved in large-scale industrial plantations. The total area planted by the FDCs was 1.21 million ha in 1989 (Anon 1990).

Another recommendation of the NCA was to establish plantations on wastelands outside forest areas through social forestry programmes. The basic philosophy was to involve people in growing trees on marginal farmlands, barren lands and other vacant lands. In 1979, with the World Bank’s assistance, the first Social Forestry Project was launched in the state of Uttar Pradesh. Similar donor-funded projects followed in other states. The plantation programmes envisaged plantings on three types of lands: (i) vacant lands along roads, canals and railway lines, and water ponds - planted and managed by the government; (ii) common village lands (planted by the government and then handed over to village communities for their management); and (iii) farmlands - planted and managed by farm owners.

In addition, the afforestation programme by the GoI under the “20-Point Programme” further boosted tree planting outside the forests in rural areas. In fact, tree planting became an integral feature of many rural development programmes such as the National Rural Employment Programme and the Rural Landless Employment Guarantee Programme, which aimed to generate employment opportunities. Until 1992, 25 percent of the rural development funds was earmarked for tree plantations and was extended to either forest departments or other planting agencies. The NWDB identified Tree Growers Cooperative Societies as important institutions for organizing people for the rehabilitation of wastelands. Two public sector cooperative organizations, namely the National Dairy Development Board and the Indian Farmers Fertilizers Co-operative Ltd., founded such societies in different parts of India in 1986. Pilot projects were launched for the formation of a two-tier structure with tree growers’ cooperatives at the village level as the first tier and state-level federations as the second tier.

Role of research and extension in supporting plantation development

In the early 1980s, research and development in support of plantation forestry remained with government institutions and consisted mainly of basic research. Public sector research on the propagation of high-yielding varieties of fast-growing species began only later. This research focus was also initiated by the private sector, such as Wimco Seedlings Ltd., Tata Energy Research Institute and ITC Bhadralacham Paperboard Ltd., among others.

Wimco Seedlings Ltd.

Wimco Ltd., a premier match manufacturing company, has been collaborating with the Uttar Pradesh Forest Department since the late 1960s to identify suitable clones of poplar for producing matches. In 1984, the company founded Wimco Seedlings Ltd. in Uttar Pradesh to initiate research on improved planting materials for the production of industrial wood. Initially, research was confined to poplars and later extended to other fast-growing species like Eucalyptus spp., Gmelina arborea, Acacia auriculiformis and Ailanthus spp. The company has achieved remarkable success in the development and propagation of two clones of Populus deltoids, G-3 and G-48. These clones attained the desired form (less taper) and growth rate, and were much preferred by farmers. Since then, two new clones have been developed, which have reached growth rates of up to 49 m3/ha/year in some of the best-managed plantations in Punjab and Haryana (Dwiwedi et al. 1990). Due to its versatility, fast growth, range of end uses (packing cases, pulpwood, poles, sports goods, plywood industry, false ceilings and fuelwood) and compatibility with agricultural production, poplar has become a valuable agroforestry species and is widely accepted by farmers.

Tata Energy Research Institute (TERI)

Researchers at TERI have worked on clonal multiplication techniques and developed clonal technology for several species (for example, Anogeissus spp., Eucalyptus spp. Populus deltoides, Populus euphratica and Paulownia spp.) since the late 1980s. By early 2001, nearly 3.5 million seedlings had been dispatched to various State Forest Departments, NGOs and private growers for field trials and routine plantings. TERI also assists in the transfer of technology to different private agencies involved in plantation forestry (TERI 2000).

ITC Bhadrachalam Paperboard Ltd.

ITC Bhadrachalam Paperboard Ltd., an integrated pulp and paper mill in Andhra Pradesh, has been raising and distributing seedlings to farmers since 1982. In 1989, it launched a research and development project focusing mainly on genetic improvement of planting stock and better plantation management practices. It developed genetically improved, high-yielding, fast-growing and disease-resistant clones of eucalyptus. Gene banks of tested and proven superior clones for large-scale commercial multiplication were also established (Lal et al. 1998). About 5.6 million Bhadrachalam clones were supplied to farmers between 1992 and 1999, and 1.6 million to various state forest departments. The annual production of clonal seedlings is now more than two million. The average productivity of Bhadrachalam eucalyptus clones ranges between 20 and 44 m3/ha/year (Lal 1999a). ITC Bhadrachalam also provides information on improved practices for establishing plantations to farmers.

Incentives during the period

The incentives offered during the period can broadly be classified as assistance provided under social forestry programmes and financial incentives for the rehabilitation of wastelands.

Incentives under social forestry programmes

The incentives provided by state governments to promote social and farm forestry varied among states and included:

Providing free seedlings in the initial stage and then at nominal prices (about ten percent of production costs) to the farmers and individuals was a common incentive. Survival incentives were provided in Bihar and Orissa but not by programmes supported by the World Bank and United States Agency for International Development (USAID). Motivators were appointed in Andhra Pradesh, Tamil Nadu, West Bengal, Madhya Pradesh, Bihar and Orissa but not in the northwestern states. Incentives to nurseries included subsidies for healthy seedlings (about Rs0.40 each[51]) or buy-back arrangements. The seedlings raised in the private nurseries were purchased by the forest departments and distributed to farmers or used by the departments when planting on the public land.

Financial incentives for the development of wastelands

One of NABARD’s functions was to provide financing for farm forestry. In 1986, the loans arranged through NABARD were at a concessional rate of 12.5 percent, which was lower than the commercial rate banks charged individuals and industries for other activities. Furthermore, loans had to be repaid only after benefits were derived from the plantations (NWDB 1987). Although some wood-based industries assisted farmers to make use of NABARD, farmers faced numerous difficulties, as they had to produce extensive documentation from all the local banks.

After the creation of the NWDB in 1985, the scope for provision of loans at concessional rates was broadened to encourage planting on wastelands and degraded sites owned by individual farmers. Public lands under lease or “tree patta schemes were also covered. Financial support was to cover tree-planting expenditures, including materials and labour costs. The repayment period varied according to species but could not exceed 15 years. Enterprises or voluntary agencies engaged in wasteland development could assist in motivating farmers, preparing projects and providing liaising services between farmers and banks, the costs of which were not to exceed 15 percent of the total costs, and had to borne by the beneficiaries (NABARD 1989).

The NWDB also initiated a Margin Money Assistance Scheme in 1987 (modified in 1989) to enhance the flow of institutional funds for afforestation and wasteland development activities that were not economically viable but socially beneficial. Under the scheme, the federal government provided grants of up to 25 percent of the project costs for community-based production of fuelwood, fodder and small timber. The scheme operated for five years (1987-1992) and the total funds provided were about ten million rupees. The assistance was offered only to registered voluntary agencies, cooperative societies and other similar organizations.

Incentives for rubber plantations

In 1954, the GoI established the Rubber Board to promote rubber plantations, to provide technical guidance to growers and to support rubber-based industries. The expansion of rubber plantations has been gradual. In 1956, the total area of rubber plantations was 86 000 ha, with 85 percent under private holdings. The development schemes introduced by the Rubber Board included subsidies for replanting and materials. Productivity improvements, marketing assistance and interest-free loans in 1957 helped in expanding the area planted with rubber trees. A total of Rs193 million was provided for replanting 53 605 ha between 1957 and 1979. Incentives targeted smallholders who managed most of the area (Table 5).

Since 1980, incentive schemes were revised. Smallholders owning up to five ha of rubber trees were entitled to a planting grant of Rs5 000/ha, paid in instalments over six to seven years after planting. Smallholders who used improved seedlings received an additional Rs6/plant (Rs8 if they belonged to schedule caste and schedule tribes)[52] for up to 450 plants/ha. Over the years, the planting grants have been raised to adjust for increasing costs. In 1993, grants were set at Rs8 000/ha and in 1997 at Rs18 000/ha (Rubber Board 2002). Due to the attractive prices for latex, many smallholders planted rubber trees. At present, about 86 percent of the total rubber plantation area is held by smallholders (Rubber Board 2002). Apart from the latex, the current annual wood production from the rubber plantations is about one million m3. Smallholder rubber plantations have expanded rapidly since 1980, but the growth has levelled off as a result of a slump in the rubber market and less attractive prices since the mid-1990s.

Table 5: Classification of rubber holdings according to size at the end of 2000

Holding size


Area (ha)


Less than 2 ha

963 613

407 601


2-4 ha

17 627

45 031


> 4 ha

5 249

37 645



986 489

490 277


Characteristics of plantations established and monitoring mechanism

Most small-scale and marginal farmers planted trees on farm boundaries and sometimes in multiple rows. Block plantations were established by medium- to large-scale farmers who were either absentee landowners or were very enterprising. Plantations raised on leased lands by landless people in rural areas ranged between 0.5 and one ha in size.

Species selection depended on numerous factors, the most important being the availability of seedlings from the government nurseries and attractive short-term economic returns. Farmers also tried to minimize competition between trees and agricultural crops. In northern India, Eucalyptus spp., Populus spp. and Dalbergia sissoo were planted widely, whereas in southern India, Eucalyptus spp., Casuarina spp. and Acacia spp. dominated.

Seedling quality control was often poor. Insufficient attention was also paid to species-site matching and technical aspects as too much emphasis was placed on achieving physical targets in terms of number of seedlings distributed or planted. This resulted in poor survival rates and low productivity. Only enterprising farmers with larger holdings used superior planting materials and applied improved practices.

Impact of incentives

It is difficult to assess the impact of each incentive on tree planting because monitoring in the various projects was inadequate. In many cases, implementing agencies only reported on targets attained, which were assumed to be partially the result of providing incentives. The total notional area of such plantations established from 1979 to 1992 was about six million ha through the support of the national and state governments as well as donor organizations (Table 6).

Farm forestry achieved significant success in some states (for example, Gujarat, Haryana, Punjab, Karnataka, Western Uttar Pradesh and West Bengal). The characteristics of viable farm forestry enterprises are large landholdings, assured irrigation, owner cultivation, marketable agriculture surplus, re-investment of profits in farming activities, risk-bearing capacity and generally better management. Plantation establishment rates declined around 1988, mainly due to falling wood prices. It is clear that to encourage tree planting on private lands, there is a need to reach out to the small-scale landholders with research, extension and improved technologies, demonstration areas, availability of inputs including certified quality planting materials at affordable prices, market information and credit facilities offering soft loans (NFAP 1999).

Table 6: Donor-assisted social forestry projects in India and area covered by incentives

Name of the project and state

Donor agency

Project period

Plantation targets (‘000 ha)

Farm forestry

Village woodlots

National Forestry Project Uttar Pradesh Phase II*

World Bank USAID

1985/1986 to 1989/1990



National Forestry Project Gujarat Phase II*

World Bank USAID

1985/1986 to 1989/1990



National Forestry Project Himachal Pradesh Phase II*

World Bank USAID

1985/1986 to 1989/1990



National Forestry Project Rajasthan Phase II*

World Bank USAID

1985/1986 to 1989/1990



Haryana Social Forestry Project

World Bank DANIDA**

1982/1983 to 1989/1990



Jammu and Kashmir Social Forestry Project

World Bank DANIDA

1982/1983 to 1989/1990



Karnataka Social Forestry Project

World Bank ODA***

1983/1984 to 1987/1988



Kerala Social Forestry Project

World Bank

1984/1985 to 1989/1990


West Bengal Social Forestry Project

World Bank

1981/1982 to 1989/1990



Bihar Social Forestry Project


1985/1986 to 1990/1991



Orissa Social Forestry Project

Sida (2 phases)

1983/1984 to 1992/1993



Tamil Nadu Social Forestry Project

Sida (2 phases)

1981/1982 to 1992/1993


131 40

Andhra Pradesh Social Forestry Project


1983/1984 to 1989/1990



Maharastra Social Forestry Project


1982/1983 to 1989/1990



Source: Saxena (1995)

* The data of Phase I started in 1979/1980 was unavailable.
** DANIDA = Danish International Development Agency, Denmark
*** ODA = Overseas Development Administration, United Kingdom
**** Sida = Swedish International Development Cooperation Agency, Sweden
***** CIDA = Canadian International Development Agency, Canada

A number of problems reduced the effectiveness of incentives. Important constraints included (NAEB-RC 1995):

Lessons learnt

The incentives offered to the private sector between 1979 and 1992, particularly to farmers, helped in augmenting tree resources outside the forest. The trees planted during this period contributed substantially to the overall wood supply, but actual production was still short of targets, principally because of the following factors:

Notwithstanding these shortcomings, the period from 1979 and 1992 in general, and the implementation of social forestry projects in particular, provided field staff with considerable experience in recognizing farmers’ perspectives related to planting trees on private land.


Investment climate in forestry plantations

An important goal of the National Forest Policy (1988) is to raise the forest cover to 33 percent of the total land area. The National Forestry Action Programme (NFAP 1999) proposes to achieve the goal in 20 years by enhancing natural regeneration of degraded forests and tree planting in degraded forests and non-forest lands of over two million ha annually. The notional area to be established annually by farmers has been projected to be 0.2 million ha (NFAP 1999).

The GoI announced a new investment policy in 1991 for facilitating the inflow of foreign capital and for encouraging investments in different sectors. However, the forestry sector has remained stagnant, and domestic financial resources are insufficient to reach the target of 33 percent forest cover. In accordance with the National Forest Policy, wood supplied to industries from government forests has been greatly reduced. Industries are expected to meet their raw material requirements mainly from private sector plantations, farm forests and imports. No policy has been formulated to attract investors to develop forest plantations. In 1992, donor-funded social forestry projects also declined. In accordance with the National Forest Policy, the federal government requested the state governments to involve local communities in the management of the degraded forests in June 1990. By 2001, most state governments had issued resolutions in support of JFM. While this has shifted the focus of tree planting to local communities, state governments continue to promote plantations albeit with reduced funds. The current generation of donor-funded projects has multiple objectives and focuses on institutional development, capacity building, technology improvements in forestry and people’s participation in forest management.

Export-import policy

India’s market for wood and wood products is predominantly domestic in nature. The export-import policy of 1992 further restricted the export of wood products. Exports of logs, timber, stumps, roots, bark, chips, powder, flakes, dust, pulp and charcoal have been totally banned. The total exports of wood products in 1994 and 2000 were only US$25 million and US$29 million, respectively. On the other hand, wood and wood products were put on the Open General License list in 1992, which means that their imports are not restricted. The tariff charges on the import of logs or rough wood (round logs and sawntimber) have been drastically reduced over the last decade (Table 7).

Table 7: Import tariff for forest products, 1999

Raw materials

Import tariff (%)

Finished good

Import tariff (%)

Round logs


Veneer sheets






Wood chips


Plywood & veneered panel






Waste paper


Other paper products


Source: NFAP (1999)

The reduced tariff resulted in a gradual increase in imports. The value of imported wood and wood products increased from US$481 million in 1992 to US$1.3 billion in 2000. It is expected to reach US$2 billion in the April 2002 to March 2003 financial year. The quantity of rough wood has increased from about 0.5 million m3 in 1992 to 1.9 million m3 in 2000 (MoC 2001). Due to raw material shortages and low production volumes, domestically produced pulp is more expensive than imported pulp. The corporate sector has responded by developing partnerships with farmers for production of raw materials at competitive costs by funding intensive high-technology plantations on private lands.

Research and development

Public sector forest research was restructured in 1990 after the creation of the Indian Council of Forestry Research and Education (ICFRE). A number of new Regional Forest Research Institutes were created to develop high-yielding clones of different tree species suitable for their regions. Seed production areas in many natural forest stands and plantations were identified, large-scale seed orchards were established and improved plantation management packages were developed.

Several wood-based companies also recently set up in-house research centres for the production of clonal seedlings to be supplied to farmers. For example, the Grasim Forest Research Institute set up by Harihar Polyfibres, a unit of Grasim Industries Ltd. in Karnataka, is now distributing about nine million seedlings annually to farmers. The company has also established 57 demonstration plots on farmers’ lands in strategic locations in Karnataka to demonstrate the effect of scientific plantation management (Maru et al. 2001). Another example is JK Corporation based in Orissa. It has undertaken research to develop high-yielding and disease-resistant clones of eucalyptus and established a four-ha clonal seed orchard.[53]

Incentives by the government

The federal government’s incentive schemes for plantations have focused on the development of wastelands, degraded forests and private non-forest lands. Financial assistance provided to government institutions, registered bodies and non-governmental organizations during the Eighth Plan is presented in Table 8.

Table 8: Financial assistance for the development of wastelands (1992-1997)


Expenditure (Rs million)

Area planted/ developed (ha)

Integrated afforestation and ecodevelopment projects

2 031.2

289 917

Fuelwood and fodder projects for forest areas

1 541.9

387 216

Grant-in-aid 100 percent to NGOs to promote afforestation


338 projects

Integrated Wastelands Development Projects in non-forest areas

2 161.6

284 000

Grant-in-aid 100 percent to registered voluntary agencies


18 684

Source: Planning Commission (1999)

Source: Planning Commission (1999)

The Department of Wasteland Development has recently initiated the Investment Promotion Scheme. It offers a grant covering 25 percent of the cost of plantation establishment to enterprises for rehabilitating wastelands. One of the conditions for the subsidy requires that the activity should not adversely affect the livelihoods of poor people. The government employs local agencies to evaluate the plantations in the first and the second year. The grant is released only after a satisfactory report on survival rates has been obtained.

In addition, state governments have devised numerous incentive schemes mainly to support small-scale farmers’ efforts to plant trees on their land. For example, in Andhra Pradesh farmers have been exempted from sales tax on the three most popular species (Leucaena leucocephala, Eucalyptus spp. and Casuarina spp.) planted in Prakasham District since May 1999. The state government has also passed a resolution to sell the wood produced by farmers through the Agriculture Market Committee based on a fixed price and payment within five days. Farmers in this district are already supplying about 0.65 million tonnes of wood to various paper and rayon mills of Andhra Pradesh and neighbouring states (APFD 2001).

Under the Rural Development and Rural Employment Guarantee Programmes, many states have also developed schemes to provide incentives to small-scale farmers. In Gujarat, the state forest department plants suitable trees, including those bearing edible fruits, on marginal land owned by farmers belonging to the poorer castes or tribes as identified in the Indian Constitution. The entire cost of plantation establishment is borne by the forest department. From the second year onwards, the beneficiaries are responsible for protection and maintenance, for which they are paid at the rate of Rs1/plant in the second year and Rs0.50 in the third year, provided that the survival rate is above 50 percent.[54] In Maharastra, small-scale farmers are provided with Rs12 000/ha to cover costs for block plantations until the third year. The payment is released in stages after performance evaluations. The survival rate has to be at least 60 percent to obtain funds in the second and third years. For teak plantations on farm bunds, grants are in the order of Rs12/tree provided in three annual instalments.[55] The area covered under these schemes is small in comparison to the intended scale of afforestation in India. In Gujarat, it ranged between 10 000 and 12 000 ha annually between 1997 and 2001. The achievement under the programme, since its inception in 1981, is 119 817 ha.[56]

NABARD has continued to refinance the financial institutions at 100 percent of the loans disbursed to borrowers for developing wastelands in forest or non-forest areas. Interest rates have changed over time - from 8.5 percent applicable with effect from 1 July 2001 to 7.5 percent in February 2002.

While grants have increased over the last ten years, the use of subsidized seedlings is declining. In Haryana, the distribution of seedlings (subsidized at 90 percent) was discontinued in 1993, although some subsidized seedlings are still handed out to the poor and needy. In West Bengal, five seedlings per industrial unit and 100 seedlings per institution are provided free-of-charge. Subsidized seedlings are also provided to small-scale landholders with up to 0.4 ha upon the recommendation of the village panchayat[57]. In Karnataka, seedlings of valuable species such as teak are priced according to market rates.

Incentives provided by the private sector

In 1984, Wimco Seedlings Ltd. started an innovative scheme to promote tree planting on farms, with (refinance) assistance from NABARD, in selected districts of Uttar Pradesh, Haryana and Punjab. Under the scheme, Wimco offered high-quality one-year old poplar seedlings to farmers at a reasonable price, provided technical assistance and extension support, arranged fertilizer inputs and provided, most importantly, a buy-back guarantee at an agreed price. The banks participating in the project disbursed long-term loans to farmers for purchasing the seedlings, planting and management. Repayment of loans was usually linked to the length of rotation (between six and eight years). Although NABARD refinanced the banks at the interest rate of 6.5 percent, the banks charged farmers ten percent. The agreed price was according to market demand and the buy-back rates offered by the company in 1993 and 1994 were as follows (Joshi and Chandra 2001):

90 cm and above girth at breast height


75-90 cm girth at breast height


60-75 cm girth at breast height


Since then, the rate has been revised to a flat rate of Rs1 600/m3 for all girth classes.[58]

The annual rate of planting by the farmers gradually increased from around 500 ha in 1984 to about 4 000 ha during 1988/1989 (Jones and Lal 1989; Lal 1991). The total area covered by the NABARD-assisted project was 30 700 ha, involving a total of 15 831 farmers, with an average of about two ha per farmer. Even after the end of the project, enterprising farmers have continued expanding plantations as a result of the impressive performance of the poplar and attractive returns. The market demand for high-quality veneer logs for manufacturing match splints, plywood and flush doors has grown over the years. The total area of poplar plantation in West Uttar Pradesh, Haryana and Punjab reached 56 100 ha in 2000 (Joshi and Chandra 2001). The farmers participating in the project ranged from small-scale farmers with less than two ha of land to large-scale farmers with more than six ha of land. Small-scale farmers who selected block plantings reported a decline in agricultural income after the third year. Therefore, planting poplars on farm boundaries was preferred to block plantings.

In 1994, Wimco launched a scheme of “smart units” to raise funds for planting poplars. Buyers of each unit would pay Rs4 000 for planting ten poplar trees on the company’s land. In return, they would receive Rs16 000 from the company after eight years. Nearly 30 000 units were sold between 1994 and 1997, and trees were planted on about 750 ha. The success of the scheme stimulated replication by several other plantation companies that made attractive financial returns on their propositions, such as doubling their investments within three years. The Security Exchange Board of India (SEBI), a wing under the Ministry of Finance responsible for overseeing investments under mutual funds, intervened to protect gullible investors and drafted stringent conditions, which the companies were unable to fulfil. The sale of new units ceased in 1999, as growth rates - and hence returns to investments - claimed by the promoters were unrealistically high.

ITC Bhadrachalam launched an incentive scheme in 1987, with refinance assistance from NABARD, for producing pulpwood by farmers. The company provided high-quality eucalyptus seedlings, technical extension services and a buy-back promise at a minimum guaranteed price or the prevailing market price, whichever was higher, at the time of harvest. The cost of seedlings and extension services offered by the company amounted to about Rs35/seedling and trees were harvested after seven to eight years. In total, 6 185 farmers participated in the scheme and planted 17.4 million seedlings covering an area of 7 441 ha. The average area planted per farmer was less than 1.5 ha, and only two to three farmers per village opted to join the scheme. In addition, 5.65 million eucalyptus clonal seedlings developed by the company benefited 1 914 farmers who planted on 3 217 ha between 1992 and 1999 (Lal et al. 1998; Lal 1999b).

Misuse of incentives and plantation schemes

About 3.5 percent (550) of all the participants in the Wimco-NABARD project breached the contract or misused the incentives. Some farmers sold their plantations before maturation to a third party and reneged on their loans from the banks. In turn, district authorities attached the properties of such farmers.[59] Others did not pay for the seedlings and services rendered by the company even though they had obtained loans from the banks. As a result, legal action has been taken in the courts. Although the funds were partially recovered, a considerable sum of Rs52.5 million remained outstanding (Joshi and Chandra 2001). On the other hand, some farmers have also approached Consumer Forums to take action against the promoters of the schemes for misleading them about the productivity and for providing poor technical assistance, which allegedly resulted in their financial losses.

The experience of ITC Bhadrachalam in the NABARD project was more alarming compared to Wimco Seedlings Ltd. as the majority of the farmers felled their plantations prematurely at four or five years. Many farmers sold their plantations to third parties and refused to repay the loans, despite having signed tripartite agreements for the sale of pulpwood to ITC Bhadrachalam.

Many other private plantation companies were also set up in the early 1990s to raise funds, promising very high returns for investments in teak plantations. They attracted a large number of individual investors, most of whom started planting teak on leased lands that were either degraded or of low productivity. The total area brought under teak plantation was about 5 000 ha. After receiving complaints about the companies’ financial mismanagement, the Ministry of Environment and Forests appointed a technical committee to look into the matter. The committee concluded that predicted yields and financial returns were grossly inflated. The teak stumps planted were also not of genetically superior quality. The SEBI found that most of these private companies were using new investments in teak units, and not the interim returns from the established plantations, for their operations. The area of established plantations was disproportionately low compared to the funds raised and investments shown. Since the companies could not justify their claims of high returns, they were asked to terminate their operations by the SEBI in 1998. Some companies collapsed because they could not pay out promised interim returns (Chundamannil 2000).

Impact of the incentives offered by the private sector

Despite problems in the arrangements among companies, banks and farmers, wood supplies from farmers have increased. Many wood-based industries followed the examples of Wimco Seedlings Ltd. and ITC Bhadrachalam, by offering financing arrangements through NABARD or independent buy-back guarantees. In addition, some companies have developed captive plantations[60] (Table 9).

While data provided by the companies cannot be independently verified, the estimated notional area covered annually is about 38 250 ha (2 000 seedlings/ha). Since most initiatives are comparatively recent and plantations are still young, the full impact in terms of wood production will only be realized in the future. However, it is certain that the companies, after initial trials and difficulties, have now attained the confidence and the expertise to produce their own raw material supplies, primarily in collaboration with farmers.

Lessons learnt

Due to the recent forest policy shift from production to conservation, the main objective of government wasteland development programmes is ecological restoration based on peoples’ participation. Priority has been given to supporting local livelihoods over the production of industrial wood. At the same time, afforestation activities financed externally and internally have declined since the early 1990s. Even the state-owned FDCs are discouraging intensive, monoculture industrial plantations.

On the other hand, the quality of the planting materials used by farmers has improved markedly, mainly due to the efforts of private companies. The productivity of the plantations raised through cloned seedlings has increased two- to threefold. Considering the huge demand for industrial wood, the plantation areas are still too small. The main impediments to plantation development are: (i) small landholdings; (ii) weak market development; and (iii) land ceiling regulations. Whereas small-scale farmers are often not willing to plant trees due to the long gestation period and market uncertainties, private companies fail to achieve the economies of scale to raise captive plantations cost-effectively due to the stringent land ceiling regulations. To move forward and realize the advantages that India can offer (for example, potential for high productivity, large labour force, huge demand for wood and wood products). Enabling policies, legislation and policy instruments need to be devised, and structural impediments and direct disincentives need to be removed.

Table 9: Number of seedlings distributed

Name of the company

Number of seedlings distributed annually to farmers

Total area planted (ha)

Captive plantations (ha)

Wimco Seedlings Ltd. Rudrapur, Uttaranchal

2.7 million poplars

56 000

750 (Populus deltoides)

ITC Bhadrachalam, Paper Boards Ltd., Andhra Pradesh

2 million

10 700 (eucalyptus)

Andhra Pradesh Paper Mills Ltd., Rajahmundry, Andhra Pradesh

20 million (Casuarina and Leucaena leucocephala)

Ballarpur Industries Ltd., New Delhi

2.5 million

1 200 (eucalyptus)

Century Pulp and Paper, Lalkua, Uttar Pradesh

5 million

4 100 (eucalyptus)

Hindustan Newsprint Ltd., Kerala

1 million

2 030

2 800 (eucalyptus and Acacia auriculiformis)

JK Corporation, Rayagada, Orissa

10 million

15 000 (eucalyptus, casuarina)

Mysore Paper Mills Ltd., Bhadravati, Karnataka

2 million

30 000 (eucalyptus)

Sirpur Paper Mills Ltd., Sirpur-Khagaznagar, Andhra Pradesh

4 820

Siv Industries Ltd., Sirumugai, Tamil Nadu

12 million

10 303

West Coast Paper Mills Ltd., Dandeli, Karnataka

4 million

2 400

Kitply Agroforestry Project, a unit of Kitply Industries Ltd., Raipur, Chattisgarh

2 million

700 (Gmelina arborea)

Harihar Polyfibres, a unit of Grasim Industries Ltd., Karnataka

12 million

60 000

Source: Data provided by companies


According to the National Forest Policy, government incentive schemes for tree planting are to target small-scale farmers and especially the weaker sections of society. Their main goals are to improve rural economies, support local livelihoods, enhance access to forest products for local use (for example, fuelwood, small-diameter wood and fodder), and achieve environmental stability. The production of industrial wood is only a secondary objective. Incentives, in the form of tax benefits, subsidized loans and extension services, to medium and large-scale farmers and others have been negligible. Income derived from selling trees grown on farmlands is exempted from the taxes. Incentives offered by the government have helped to improve the overall situation, but the cost-effectiveness and real impact have never been quantified due to the absence of adequate monitoring and appraisal tools.

To meet the demand for industrial wood, private companies have offered their own incentives to farmers. Besides buy-back guarantees, some companies assist farmers in obtaining bank loans through tripartite agreements. There are many successful experiences in establishing high-yielding plantations. However, regulatory frameworks for the operation of such schemes have not been developed, which has led to some problems. Moreover, the land ceiling laws limit the size of companies’ landholdings. This restriction seriously affects the efficiency and economic viability of plantation management.


The Planning Commission of India, in finalizing the “Approach Paper to the Tenth Five-Year Plan (2002-2007)”, has taken note of land and forest degradation in the rural areas. The deterioration of these resources, in combination with the overexploitation of the groundwater, poses a potential threat to food security. The Commission has also linked deforestation to the increasing drudgery of rural women in collecting fuelwood, which is further aggravated by the worsening condition of traditional water sources.

The National Development Council[61] has directed that the forest cover[62] be increased to 25 percent by 2007 and 33 percent by 2012.[63] Achieving this target requires adequate funds, an appropriate policy framework, innovative and people-centred policies and schemes, efficient delivery mechanisms and effective monitoring at the field and national levels.

Despite the high population density, sufficient land is available to expand tree plantations not only for ecological restoration but also for the production of industrial wood. Opportunities have not been fully realized because of limited funds. Increasing investments in plantations through the involvement of the private sector requires innovative policies and support through appropriate financial policy instruments, including the following:

The GoI is contemplating a massive people’s movement (known as “Greening India”) to raise the country’s forest cover to 33 percent by 2012. The recommended approaches include mass production of high-quality planting materials, and establishment of centralized hi-tech nurseries and a network of satellite nurseries throughout the country. Local forest officers at the district or division levels can be appointed as the Certification Authority to register, and exercise strict quality control of, government and private seed orchards, clonal orchards, plus-trees and hi-tech nurseries, tissue culture facilities and satellite nurseries.

Close collaboration with the Agriculture, Rural Development, Public Works, Irrigation and Panchayat Departments is needed to achieve the targeted coverage. At the same time, the “Greening India” initiative shall endeavour to develop and facilitate linkages between production systems and user groups. Creating awareness amongst people for tree planting in general, and quality materials in particular, will be an integral component of this programme. Non-governmental organizations and reputable village-level voluntary agencies will be involved in assessing and addressing the requirements for planting materials (quantities and species-mix), technology transfer, ecological rehabilitation of degraded sites and capacity building at all levels.


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Anon. 2000. Agricultural statistics at a glance 2000. New Delhi, Directorate of Economic and Statistics, Ministry of Agriculture.

Anon. 2001. Draft final proceedings of National Meeting on Community Forestry Issues, sponsored by the World Bank, 8-9 November 2001, Manesar, Haryana, Development Alliance, New Delhi.

APFD. 2001. Brief Note on farm forestry plantations in Prakasham District of Andhra Pradesh, Planning and Extension Division, Ongole, Hyderabad, Andhra Pradesh Forest Department.

Census India. 2001. Census data. Census India 2001, Registrar General and Census Commissioner of India, New Delhi, Ministry of Home Affairs.

Chundamnnil, M. 2000. Teak plantations in Kerala: an economic review. In T. Enters & C.T.S. Nair, eds. Site, technology and productivity of teak plantations, pp. 239-259. FORSPA Publication No. 24/2000 and TEAKNET Publication No. 3. Bangkok, Forestry Research Support Programme for Asia and the Pacific, Food and Agriculture Organization of the United Nations.

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FSI (Forest Research Institute). 1987. State of forest report 1987. Dehradun, Forest Survey of India, Ministry of Environment and Forests.

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Jones, N. & Lal, P. 1989. Commercial poplar planting in India under agro-forestry system. Commonwealth For. Rev. 68 (1): 19-26.

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Lal, P. 1999a. Private sector forestry research - a success story from India. Indian Forester, 125 (1): 55-66.

Lal, P. 1999b. Registration of clones and certification of clonal planting stock. Paper presented at the National Seminar on Poplars, Forest Research Institute, 25-27 November 1999, Dehra Dun.

Lal, P., Kulkarni, H.D., Srinivas, K., Venkatesh, K.R. & Santa-Kumar, P. 1998. Genetically improved clonal planting stock of eucalyptus - a success story of India. Secunderabad, Andhra Pradesh, ITC Bhadrachalam Paperboards Ltd.

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MoC. 2001. Based on the compilation from the monthly publications of the Revenue Intelligence Wing of the Ministry of Commerce.

MoEF. 1988. National Forest Policy 1988. New Delhi, Ministry of Environment and Forests.

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NAEB. 1999. National Afforestation Eco-development Board, Ministry of Environment and Forests (computer print out).

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NFAP. 1999. National Forestry Action Programme - India, Volume 1. New Delhi, Ministry of Environment and Forests.

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[47] Former Director of Forests of India, New Delhi, India.
[48] Chief Conservator of Forests, State of Goa, India.
[49] Since 1951, India has completed nine five-year plans and is currently implementing the Tenth Plan (2002-2007). The guiding principles of planning are determined by the basic objectives of growth, employment, self-reliance and social justice.
[50] These were the Andhra Pradesh FDC, Madhya Pradesh Rajya, Van Vikash Nigam, Maharastra FDC, Tamil Nadu Forest Plantation Corporation, Tripura Forest Development and Plantation Corporation, and West Bengal FDC.
[51] US$1.00 = INR46 (16 September 2004).
[52] The Constitution of India directs the states to promote with special care the educational standards and economic interests of the weaker sections of the people to protect them from social injustice and all forms of exploitation. The government by public notification(s) specifies the castes, races or tribes, or tribal communities that shall, for the purposes of the Constitution, be deemed to be “scheduled castes” or “scheduled tribes” for positive discrimination of their statutory rights and speedy social and economic development. Since the names of such communities appear in the schedules appended to the aforementioned public notifications, these are generically called scheduled castes/tribes, as the case may be.
[53] Sharda, A.K., Chief General Manager (Commercial), JK Corporation, Rayagada, Orissa, 2000, personal communication.
[54] Khanna, P., Chief Conservator of Forests (Development), Gujarat, 2002, personal communication.
[55] Chandra, A., Joint Director, Konkan Social Forestry Circle, Thane, Maharastra, 2002, personal communication.
[56] Khanna, 2002, personal communication.
[57] An administrative body of elected members for a group of villages.
[58] Joshi, N.K., Consultant, Wimco Seedlings Ltd., 2002, personal communication.
[59] An attached property cannot be sold or mortgaged by the owner. If the owner fails to pay up after being given sufficient opportunities to do so within a reasonable length of time, the dues can be recovered as arrears of land revenue by auctioning the property.
[60] Plantations established and managed by a company for its own use.
[61] The National Development Council, headed by the Prime Minister, is the highest planning body in India.
[62] Although forest cover in the country extends over 19 percent of the geographical area, the extent of good forest cover (over 40 percent crown cover) is only 12 percent.
[63] The NFAP envisages a time horizon of 20 years, which was recently reduced to ten years.
[64] Editors’ note: In general, increasing import tariffs does not enhance competitiveness but promotes inefficiencies.

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