Section 2 of CAF Act : Section 2: Definitions

Explanation using Example

Imagine a scenario where a real estate development company, let's call it XYZ Estates, wants to build a residential complex in an area that is currently a part of a forest. According to the Forest (Conservation) Act, 1980, XYZ Estates cannot just start construction. They need to apply for the diversion of the forest land for non-forest use.

Once they get the approval for land diversion, they are required to do compensatory afforestation, which means they need to plant trees in another area equivalent to the forest land they are using for their project. This is to compensate for the loss of forest cover.

The user agency, in this case XYZ Estates, would then give funds equivalent to the net present value of the forest being diverted. This value represents the quantification of the environmental services the forest area would have provided if it wasn't diverted for non-forest use. These funds go into the National Fund or the State Fund, depending on the location of the project.

The funds are then used by the National Authority or the State Authority for the purpose of afforestation and conservation of natural resources. All these activities are monitored by a monitoring group of experts to ensure the funds are being used properly.

If XYZ Estates fails to comply with these rules, they may be required to do penal compensatory afforestation, which means they would need to plant more trees than originally required.