KATHMANDU — In October 2019, Nepal’s government introduced a new Forest Act.

The law laid the basis for the establishment of the Forest Development Fund (FDF) with an extensive mandate ranging from running afforestation programs to facilitating research and addressing human-wildlife conflict.

Yet, five years later, the FDF has not spent a single rupee, even as the forest-managing communities it aims to assist struggle with financial challenges in preserving the country’s forests.

“We have around 6.4 billion rupees [$47 million] in the forest department’s accounts set aside for the Forest Development Fund,” said Bijay Dhakal, an officer at the Department of Forests and Soil Conservation. “As of now, the fund itself doesn’t have a separate bank account,” he told Mongabay.

The Forest Regulation, prepared by the Ministry of Forests and Environment to implement the act’s provisions, contains a long list of mandates for the fund. The FDF has been authorized to support forest development and conservation by promoting and managing forests, establishing nurseries, preventing encroachment and planting trees in public and degraded lands.

Similarly, it has been assigned to restore degraded ecosystems and manage environmentally sensitive areas, address human-wildlife conflict and climate change and control forest fires and the spread of invasive species.

The fund is authorized to facilitate research, relocate vulnerable settlements and foster collaboration between provincial and local governments, forest user groups and organizations.

“The government is working on a set of guidelines to operationalize the fund,” Dhakal said.

Under the regulation, the fund draws revenue from four primary sources. First, when forest land is allocated for “development work,” developers, whether governmental or nongovernmental, must pay a lease fee as stipulated by law. This fee is directed to the fund. Second, the law requires developers to plant 10 trees for every tree cut.

If they fail to comply, they may pay the government to undertake compensatory afforestation on their behalf, with these payments also supporting the fund. Third, development projects that use national forest land, such as factories or companies, are required to contribute 1% of their profits to the fund as an environmental services fee. Lastly, the fund is authorized to collect and manage revenue from carbon trading initiatives.

Even when the FDF begins operation, pending approval of its guidelines, it will not have full access to the allocated funds. “Of the 6.4 billion rupees earmarked for the fund, only around 2 billion rupees [$14.7 million] is in cash. The remaining 4 billion rupees [$29.4 million] exists as government assurances,” officer Dhakal said.

Only last month, the Council of Ministers approved a proposal waiving the requirement for government projects to deposit money into the fund for the current fiscal year, provided the Ministry of Finance guarantees the amount will be transferred once the fund becomes operational.

“This suggests the government may lack the intention to operationalize the fund,” said Dilraj Khanal, a lawyer specializing in natural resources law. “If the fund becomes operational, the government would need to allocate over 4 billion rupees at a time when it is struggling to meet revenue targets,” he added.

Even if the operational guidelines are passed and the government deposits the amount it promised, it won’t be easy for the fund’s administrators to disburse the money, as has been the case with other similar funds in the past.

For example, the federal government has been collecting 1.5 rupees ($0.01) as a pollution tax for every liter of petroleum sold in Nepal over two decades . The fund has accumulated more than 16 billion rupees ($118 million), but the government has failed to use it for its intended purpose.

As the fund languishes in red tape, the country’s forests continue to degrade for lack of investment, said Khanal, also an adviser to the Federation of Community Forest Users, Nepal (FECOFUN). “The communities are having to live with wildfire every summer, and they don’t have the capacity to take measures to prevent or control them,” he said, adding that money from the forest development fund could be put to use by enhancing their capacity to deal with and manage forest fires getting worse due to climate change.

According to Global Forest Watch, Nepal has been losing a significant amount of tree cover due to fires during the dry season, which begins in mid-February. The data show that of the 48.6 kilohectares (48,600 hectares or 120,100 acres) of forest cover lost between 2001 and 2023, 7,050 hectares (17,430 acres) were lost due to fire. In 2009, 1,330 hectares (3,290 acres) of forest cover were lost to fires, accounting for 24% of all tree cover loss for that year.

At the heart of Nepal’s forest conservation are the community forest user groups that have received global acclaim for helping increase forest cover from 26% to 45% in the last 25 years.

“We are watching our forests disappear due to rampant fires in the dry season, and yet there’s no real support from the government,” said Kalpana Bhandari, chair of FECOFUN, Lumbini Province.

All community forest user groups need to come up with management plans every year and get them approved by the provincial authorities before they become eligible for any official support. Some forest groups don’t even have the capacity to prepare such plans, as hiring consultants is expensive, Khanal said. Money from the fund would have been well used if it were invested in the community forest groups, he said.

The fund’s centralized structure also conflicts with Nepal’s federal system, which grants provincial governments more authority over local resources. The centralization of the fund is at odds with the spirit of federalism and has created tensions between the central government and provincial authorities, who feel sidelined in the decision-making process, an official at the ministry told Mongabay on condition of anonymity as the official was not authorized to speak to the media.

The official said it would have been a better idea to create funds such as the FDF at the provincial level so they would be easier to manage and communities could have easier access to them. But the official said the federal government doesn’t trust the provincial authorities and doesn’t want to delegate power, as they still harbor a centralized mindset.

Banner Image: Members of a community forest group in Kavre, Nepal.

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