15. Policy Impacts and Economic Viability

15. Policy Impacts and Economic Viability

The economic, socio-economic, and environmental impacts that have been projected as a result of implementing the programs of the Master Plan for Forestry Sector Policy of 1989 are:


15.1     Economic and Socio-economic Impacts

Increased Fuelwood Production

If the programs of the Master Plan of 1989 are implemented, fuelwood production will increase from 7.3 million tones in 1985-86 to 10.8 million tones in 2000-01 and to 16.3 million tones in 2010-11. In comparison, the current trend will result in the production of just 9.2 million tones of fuelwood in 2000-01 and 12.2 million tones in 2010-11. The plan will increase fuelwood production by 1.6 million tones in 2000-01 and by 4.1 million in 2010-11.The difference in production in 2010-11 is worth Rs.8973 million at current prices, assuming that fuelwood deficits are met by importing kerosene, or Rs.3607 million in terms of forgone maize production of 951,000 tonnes, assuming that dung and agricultural residues are used as fuelwood substitutes rather than as fertiliser.


Increased Timber Production

Under the Master Plan, sustainable timber production will increase from 0.88 million cubic meters in 1985-86 to 1.64 million in 2000-01 and to 3.48 million cubic meters in 2010-11. In comparison the current trend of timber production suggests there will be only 1.36 million cubic meters in 2000-01 and 2.21 million in 2010-11. At current prices, the difference in timber production of 1.27 million cubic meters in 2010-11 will be worth Rs.4547 million.


Increased Fodder Production

Under the Master Plan, sustainable fodder production from forest land and tree farms will increase from 14.6 million tonnes of fresh matter in 1985-86 to 18.2 million tonnes in 2000-01 and to 24.3 million tonnes in 2010-11. In comparison, the corresponding fodder production, according to the current trend, will be just 16.0 million tones in 2000-01 and 17.5 million in 2010-11. The difference in fodder production of 6.8 million tones in 2010-11 could support an additional 2.7 million buffaloes, which in turn could produce 2.1 million tonnes of milk worth Rs.10870 million, and 2.67 million tonnes of dry dung. If used as fertiliser, the estimated additional dung production could raise maize production by 316,000 tones, which is worth Rs.1199 million at current prices.


Increased Income

The above estimated increases in fuelwood, fodder, and timber production in 2010-11 means an increase in income of Rs.23, 900 million at current prices.


Greater Employment Opportunities

Employment predicted to result from the implementation of the Master Plan is equivalent to 2.5 million person-years of full-time jobs in 2010-11, as opposed to the 1.7 million person-years projected using the current trend.


Land Use

The development programs proposed will have only a marginal effect on agricultural land use and on the area of agricultural land per capita. Whatever additional land the forestry sector makes available for agriculture will be overshadowed by the increase in population, so that cultivated land per capita will continue to decrease to 0.12 ha. in 2010-11.


The development programs proposed will also have a minimal effect on the land ownership structure. However, if we consider the government land placed under the control of rural people who benefit from community forestry and private forestry programs, an additional 1.8 million ha. of land, or 0.09 ha. per capita, will be under the management and control of rural people in 2010-11.


  Quality of Life

The quality of life of rural people, especially those belonging to the lower income groups, will improve as a result of the increased availability of fuelwood for cooking and heating; more feed for livestock, which in turn will provide more milk, meat, hides, and dung; more timber for shelter; increased security from natural disasters because of better soil cover and more erosion control structures; and more amenities from the protected areas.


15.2     Environmental Impacts

The overall aim of implementing the Forestry Sector Policy of 1998 is to improve the management of the country’s forestry resources, and thereby balance the needs of the people, the production systems, and the environment. The programs will have substantial positive impacts on the environment: forest cover on degraded areas will be restored; exploitation of natural forests will be controlled by local people to their own benefit; natural forests will be managed; soil conservation will be promoted; the network of national parks and wildlife reserves will be protected and maintained; biodiversity will be conserved; and the people will be made aware of the need to balance their needs for forest products with the ability of ecosystems to supply these needs.


An examination of the programs for implementation subsumed by the Forestry Sector Policy of 1998 reveals no expected adverse environmental impacts. In fact, the entire Master Plan is an environment-friendly development plan.


Careful project design and responsible monitoring, however, are needed to mitigate any adverse effects of forest-based industries. The small size of such industries means that their negative impacts will be small, but it also means that they cannot afford expensive environment-friendly equipment. Financial support, utilisation of appropriate expertise, and disallowance of production units that are too small to be able to safeguard the environment will help to control any adverse effects.


15.3     Economic Viability

The forest establishment and management schemes proposed under the Forest Policy of 1997 are all economically viable. A better mechanism for resource allocation will ensure that soil conservation structures are constructed only in those areas where the socio-economic benefits cover their costs.


An economic internal rate of return (EIRR) has been estimated for the Master Plan as a whole. Only those programs which deal with the production of fuelwood, timber, and fodder were considered to be profitable. Supportive programs such as human resource development forest resource information and management planning, research and development, and forestry extension were all included as expenses. All investment and recurrent costs, including physical contingencies, but excluding duties and taxes, were taken into consideration in estimating the EIRR.


The analysis was carried out using 1988 constant border prices. To convert the prices of internationally traded commodities to local currency, an exchange rate of Rs.25.4 to one US dollar was used (on December, 1997 the exchange rate was Rs. 63 to one US dollar).


The EIRR resulting from the implementation of the above mentioned programs of the Master Plan is 36%. Its sensitivity to changes in costs and benefits has been determined. Incremental costs would have to increase by over 2.5 times, or incremental benefits drop to less than 40% of their estimated value for the EIRR to fall to 12 percent.