Forests of the future: A national economic opportunity

More than two-thirds of India’s forest land (approximately 31 million hectares) is classified as open forests, i.e., forests with a tree canopy of less than 40 percent. All of this land is available for energy production through regeneration. Image: Shutterstock

71 million hectares of forest area. Almost 22 percent of India’s land. 7.2 billion tonnes of carbon stock. Spaces that conserve biodiversity for ecological balance. That is a quick outline of India’s forests. What we do not see at first glance, however, is that the forest economy is a multi-billion-dollar industry. Furthermore, Indian forests are also an immense landscape of opportunity—contributing to the national economy and capable of addressing many of the country’s green future needs at scale, all through conserving and regenerating forest spaces. The 200 million people who live in and around the forests will enable tapping into this opportunity. 

Forests of tomorrow

The country’s mandate for ethanol blending in petrol has been raised from 10 percent to 20 percent, to be achieved by the year 2025-26. This will also result in a direct positive forex impact for multiple tens of thousands of crores (Approximately Rs40,000 crores has been the forex impact in eight years from ethanol blending). All the hard-to-abate sectors, such as chemicals, cement, and steel, require fossil-fuel substitutes to meet their emissions reduction targets. However, the demand for energy substitutes at this scale cannot be met from agriculture alone without putting food security at risk or dedicating more land to crops, creating a conflict between multiple demands for land. Forests are an excellent source of fossil-fuel substitutes, without compromising food security, without leading to forest degradation, and while increasing forest cover. More than two-thirds of India’s forest land (approximately 31 million hectares) is classified as open forests, i.e., forests with a tree canopy of less than 40 percent. All of this land is available for energy production through regeneration.

Mahua flowers are a great ethanol resource. These flowers fall to the ground in March and are collected in large quantities from forests across Central India. Bamboo and pine needles, owing to their high calorific values, make excellent choices as coal substitutes. Bamboo is native to vast expanses of forests in Madhya Pradesh, Odisha, Maharashtra, Jharkhand, and Chhattisgarh, as well as several states in the North-East. A grass species, bamboo thrives from and requires regular harvesting, which also reduces the risk of forest fires from dried bamboo. Pine needles fall to the ground across forests in the Himalayas and need to be collected and removed to prevent forest fires. Between Mahua, Bamboo, and Pine, just three widespread tree species, forests can contribute significantly to India’s energy transition away from fossil fuels. And these are only a few illustrative examples of the large-scale opportunities that forests provide.

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Forests in our daily lives

Forests represent not only great sources of green energy in the future, but they are also abundantly present today in our daily urban lives. We don’t realise the extent of their presence. In the paper we use, the textiles in our garments and towels, in our nutritional supplements, in shampoos and body lotions—raw materials sourced from forests are present in all of them. Seeds, flowers, fruits, nuts, herbs, mushrooms, and leaves of different trees and shrub species are collected by forest-dependent people. These forest products constitute raw materials for multiple industries such as alternative medicine and nutraceuticals, processed wild foods, nature-based cosmetics and perfumery, pharmaceuticals and well-being, and paper-and-pulp industries.

Tapping into the big forest economy opportunity

Forests provide valuable raw materials to multiple industries, both current and emerging. There is supply and there is demand and yet, the two have not fully reconciled to harness the big economic opportunity in the forest economy. Industry requires a secure, formal, assured, and cost-effective source of raw materials at scale, be it for the existing sectors or future energy and fossil fuel alternatives. Resources must be accessed such that forests continue to be cared for and nurtured. This is where the other important stakeholder in the forest economy comes in—the local communities.

Approximately 200 million people live in and around forests in India. They depend on these forests for their cash incomes as well as food, fodder, fuelwood, and timber needs. These communities have irreplaceable native knowledge about the forest ecosystems, their biological wealth, their multiple uses, and the best way to manage the forests sustainably. They collect and sell forest products that constitute raw materials to multiple industries. However, this first mile is informal, invisible, and fragmented, delivering a very poor value to these communities and causing the destruction of potential value to the industry and the economy at large.

Creating the right economic incentives at the community level will ensure the long-term and sustainable management of forests by local communities and the delivery of better value to both the community and industry. Community Forest Resource Rights under the Forest Rights Act, 2006, provide ownership and management rights over the forests to local communities. When communities, with the security of tenure, organise themselves into medium-scale formal enterprises, the industry can source directly, cost-effectively, and at scale, from these enterprises. This will enhance visibility and improve traceability in the supply chains, in addition to creating a secure and assured source of supply to the industry. With this engagement encompassing legal authority at the local level and the formal structure of enterprises, accountability for sustainable extraction and management can be easily fixed with the local communities.   

Early successes in building this model are already underway. BILT Graphic Paper Products Limited (BGPPL) is sourcing bamboo from community-owned forests in Maharashtra at scale and AAK is preparing to source sal seeds from women-led community enterprises in Jharkhand in the upcoming summer harvest season. Many such partnerships are quickly taking shape.

“BGPPL is already well aligned with the triple win approach; benefitting the tribals dependent on bamboo for their livelihoods. BGPPL has successfully built a meaningful long-term relationship by sourcing bamboo directly from them in the Gadchiroli Forest division for its pulp and paper production unit in Ballarshah, Maharashtra. We are working and extending our efforts to operationalise this model in Odisha and Gujarat also by this year’s harvest season,” says Dr Deepak Kumar Khare, Vice President – Procurement, BILT Graphic Paper & Products Ltd. (BGPPL).

Dheeraj Talreja, President, South Asia, AAK, says, “AAK appreciates the potential of the forest-economy model in India. We are excited to extend our engagement with the forest-based communities in India and source from community-owned forests; not just for our existing raw material requirements but for our future expansion as well”. Headquartered in Sweden, AAK is a global leader specialising in plant-based oils and fats.

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A combination of industrial and emerging technologies will enable value creation at scale, with additional elements of improved visibility and traceability. For example, solar dryers at the community enterprise level, sieves to grade and sort raw materials, rotors to crush bamboo, or simple machines to expel oil or make fuel briquettes. Earth observation satellites provide high-resolution and high-frequency images that can be combined with ground data collected by local communities to produce precise inventory estimates as well as predict yields for business planning, all the way up the supply chain. The same technology will also serve as the measurement tool for sustainability. Any change in basic parameters like tree cover or carbon stocks at the landscape scale will be detected in real-time. This information, when made available to all stakeholders, acts as the incentive for local communities to ensure sustainable management and provides industrial buyers with the lever to ensure responsible supply chains.

A triple win

This forest economy model is a triple-win opportunity—good for profits, the planet, and the people. Forests are cared for, conserved, and regenerated. They provide energy and raw material to the industry at scale. Close to 200 million people have higher incomes, better livelihoods, and local jobs because of them. And the industry has access to cost-effective, secure, and assured sources of high-quality raw materials. Through a substantial increase in the value created, and through impacting the forex reserves from import substitution, forests will make a significant contribution to the macro economy of the country as well. The model will contribute significantly and substantially to multiple Sustainable Development Goals (SDGs):

• #1 – No Poverty,
• #5 – Gender Equality,
• #8 – Decent Work and Economic Growth,
• #10 – Reduced Inequalities,
• #12 – Responsible Consumption and Production,
• #13 – Climate Action; and
• #15 – Life on Land.

Join the ride

Industry leaders and State Governments are coming together in amplifying this opportunity. This effort is incubated at the Indian School of Business, through facilitation in operationalising the model and bringing the forest economy stakeholders together. We welcome interest from industry partners that have potential use for anything that grows in a forest, from policymakers interested in triple-win solutions, from technology companies committed to social development, and from consumer-facing businesses interested in responsible supply chains; come join us in building the Forest Economy.

Ashwini Chhatre is an Associate Professor of Public Policy and Executive Director at the Bharti Institute of Public Policy, Indian School of Business. He can be reached at ashwini_chhatre@isb.edu.

Sushma Kattamuri is a Corporate Engagement Specialist for the Initiative on the Forest Economy at the Bharti Institute of Public Policy, Indian School of Business. She can be reached at sushma_kattamuri@isb.edu.

[This article has been reproduced with permission from the Indian School of Business, India]