Financing of wasteland afforestation in India

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Abstract

India has vast tracts of wastelands, which have been lying barren for ages. Most such lands are physically suitable for growing trees and thus could be put to socially productive uses. However, although usually economically viable, afforestation requires massive initial investment, generally beyond the means of the landowners. Also, government budgetary allocations do not cover current needs. In this situation, institutional credit is required. The National Bank for Agriculture and Rural Development (NABARD) of India has recognized this need and has devised a number of different schemes to provide refinance facilities to individuals and organisations. Although the number of forestry schemes refinanced by NABARD has increased rapidly in the past, they currently constitute only about 1% of the total number of loans sanctioned, and only about 2% of NABARD's cumulative loan disbursement to date. In fact, since 1992, the share of afforestation schemes has declined. A number of factors have been identified as major constraints, including time-consuming and complicated procedures for accessing land; restrictions on harvesting and selling trees; delays in sanctioning and disbursement of bank credit; non-remunerative prices for tree products; and flawed public policies and programmes. This article argues that unless these constraints are overcome, NABARD will not be able to play an effective role in speeding up development programmes in the forestry sector. It further argues that most of the current constraints on institutional credit for wasteland afforestation can be removed or relaxed. Practical strategies are suggested to mobilize more funds and channel more institutional credit for wasteland afforestation in India.

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