Alysis of The Property

NOTES AND
COMMENTARIES
presents preliminary
research, review of
literature and comments
on published papers or on
any relevant subject
An Analysis of the Property Rights

of Forest Dependent Communities:
The Indian Context
B Sundar
or the greater part of the twentieth century, the ownership and property rights
of forests and other natural resources (like grasslands, territorial rivers, lakes
and streams, hill ranges and mountain systems) have vested with the Indian
state. Since 1990, various states ceded a portion of these property rights over forest
lands and usufructs from natural resources (like fodder grass, lops, tops, branches,
various types of non-timber forest products and so forth) to forest dependent communities (also referred to as forest communities/forest dwelling communities/vana
samrakshana samithis (VSS) in this paper) with a view to involving these communities in the protection and sustainable development of the forests and natural resources
through the joint forest management programme.
In view of the accrual of these property rights to the forest dependent communities, the
benefits from forests and natural resources are rival in consumption between these
communities who now use forests and natural resources for survival needs (food,
medicine, firewood, agricultural implements, shelter, fencing, non-timber forest products for local trade and fodder for livestock) without fear of the law and the industrial
sector which uses these resources as raw materials for their businesses.
KEY WORDS
Environment
Forest Dependent
Communities
Vana Samarakshana Samithi
(VSS)
Social Entrepreneurship
Forest Administration
Private Participation
Liberalization
There is a perception that the vesting of property rights with the forest dependent
communities over forest lands and its products through the joint forest management
programme has not resulted in rejuvenation of degraded forests, perhaps leading to
environmental degradation, which is supported by a few studies (Chakrabarti & Datta,
2009; Sagar & Singh, 2004). An opposing, popular perception exists that since forests
and forest dependent communities have co-existed with each other for centuries, the
fear of over-exploitation of forests and consequent environmental degradation is not
valid and well-grounded.
Similarly, the recent rulings of the judiciary on the issue of the use of forests and
natural resources as raw materials by private industry leads one to infer that such
usages result in over-exploitation of natural resources beyond their carrying capacity
leading to environmental degradation. This common knowledge has also been popularized by media to some extent.
In the backdrop of the above opposing perceptions, the paper focuses on three questions:
VIKALPA VOLUME 38 NO 3 JULY - SEPTEMBER 2013
79
1. Does vesting of property rights over land and natural

resources with forest dependent communities lead to
environmental degradation?
2. Can private industry and entrepreneurship models
be harnessed to address the livelihood concerns of
forest dependent communities in an environmentalfriendly manner?
3. What would be the impact of integrating private industry, entrepreneurship, and forest dependent communities on the economy?
Before embarking on an analysis of the issues involved in
answering the above questions, it may be useful to understand environment and its services from the perspective
of public goods.
Our environment is a global public good (GPG) whose
benefits accrue to a broad group of countries and populations across the world in a sustainable manner without
compromising the needs of such benefits of future generations (Anand, 2004; Kaul, Grunberg, & Stern, 1999).
Sunlight and air can be thought of as pure GPG whose
benefits accrue to all the population groups in the world.
By their very nature, GPG cannot be provided by national
governments alone, but needs international cooperation
amongst several nations at a global level. Take the example of climate stability, a GPG that is essential for the
well-being of mankind. The south eastern coast of India
was ravaged by a tsunami in 2004 which was caused by
unstable climate conditions over which the state had no
control. International cooperation amongst nations alone
would provide and secure climate stability.
REVIEW OF LITERATURE
property rights over environmental resources aimed at

creating a free market mechanism to allocate environmental resources to their best use is not a suitable mechanism
to solve externality problems relating to environment. In
the Indian context, the State is the owner of all geographical areas classified as forests in statutory records under
the Indian Forest (Conservation) Act, 1980 (Gazette of
India Extraordinary, 1980). Private individuals/institutions must obtain permission from the state on a lease
basis to extract produce and usufructs from lands classified as forests.
In a diametrically opposite vein, Prasad (2003) observes
that problems relating to environmental degradation can
be solved if property rights over environmental resources
are defined, are universally applicable and enforceable
which ensures that the commercial incentives for individuals and firms to use their resources efficiently are
aligned with sustainable environmental management
practices. The author asserts that establishment of private property rights over environmental resources is preferable to community ownership.
Unnevehr (2004) provides more clarity by considering
property rights as an intermediate public good that is
necessary for the smooth supply of good quality environment, a final GPG, as negative/positive externalities are
generated in the management of environment which transcend national borders. Under these conditions, the researcher argues that it is necessary to internalize
incentives as in the case of sustainable forestry and natural resource management practices driving firms to adopt
green labels and influencing consumer choice.
We begin by examining the meaning of property rights,

GPGs, and the linkages of property rights with environmental resources, an important class of GPGs. Prasad
(2003) defines property rights as a claim over a series of
benefits that are legally protected by the state. Pindyck
and Rubinfeld (2005) define property rights as a set of
rules and regulations that are legally protected and which
define what firms and individuals may do with their property.
Despite the ambiguous conceptualization of property

rights over environmental resources as noted above, it is
clear that varying costs would need to be incurred for the
provision of GPGs. The weather reports of the World
Meteorological Organization are a GPG which can be
disseminated across the world at negligible costs
(Clunies-Ross, 2004). But huge financial resources in the
form of technical know-how and pollution-free equipment/s may be required to reduce the greenhouse gases
emitted by the Indian airlines industry.
Referring to the pithy example of resource-poor Indians

requirement to pay huge compensation to the resourcerich Western developers exploiting the Amazon basin for
wood resources, Dragun (1999) observes that the private
According to Clunies-Ross (2004), GPGs not only include

narrowly defined goods and services like climate stability, weather data, elimination of dangerous diseases, and
financial stability, but also humanitarian concerns like
80
AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...
world social justice, health, education, pollution-free environment and poverty eradication that have been
adopted in the Millennium Development Goals by the
United Nations in 2000. Clunies-Ross estimates that developing countries may need an additional $50-$60 billion per annum between 2002-15 to meet the millennium
development goals and proposes the following sources
of funding that may help poor and developing countries
to achieve them: regular allocation of special drawing
rights of the International Monetary Fund, internationally coordinated currency transaction tax, and philanthropy from large private fortunes. These estimates suggest
the scale and order of funding required for ensuring the
availability of GPGs for mankind.
Swanson and Goschl (1999) argue that assignment of
property rights should be made at those levels in an industry structure that are effective at investing in the assets concerned to ensure efficiency and equity. While such
an assignment is possible in industries like agriculture
and pharmaceuticals that depend on plant germplasm,
the authors observe that such assignments may not be
possible in the case of environment where it is difficult to
divide the resource into discrete parts that could fit into a
property rights system which results in misallocation of
property rights.
Levy and Friedman (1994) assert that the valuation of
environmental and state-owned natural resources that
are non-substitutable due to their unique attributes will
vary with the allocation of property rights. The owner of
a natural resource (say, a grassland range) would assign
a higher valuation to her property. Accordingly, valuation of environmental and biodiversity resources where
property resources are ill-defined is subject to huge variations. By the above logic, the Indian state, as the owner of
all environmental resources in its territory, must assign a
higher valuation to its environmental resources relative
to market-determined rates. The studies of Rasul, Chettri,
and Sharma (2011) clearly indicate that no proper methodologies and framework exist to evaluate environmental services with reference to mountain systems in India.
On the basis of empirical tests conducted on 185 countries covering the period 1990-2004, Battig and Bernauer
(2009) report that countries with democratic institutions
show a higher commitment and generate policies to reduce greenhouse gas (GHG) emissions as compared to
countries with other forms of political institutions. HowVIKALPA VOLUME 38 NO 3 JULY - SEPTEMBER 2013
ever, the researchers also report that effect of democratic

institutions on actual emission reductions of GHG is not
clear. These findings provide support to the argument,
embodied in the joint/community forest management
(JFM/CFM) programme of the Indian state, that community involvement through the formation of democratic village-level forest communities foster actions that enhance
the environment quality.
Tacconi (2011) argues that true Coasian transactions1 are
not applicable to the supply of environmental services
and might lead to inefficient outcomes. Tacconi contends
that if a market for environmental services is created, the
resulting allocation would be more efficient than Coasian
transactions, though such allocation may not be sustainable in the long run. Tacconi concludes that decisions
and actions to conserve nature cannot be made on the
basis of market-based evaluations alone but should be
guided by the human spirit which is above the economic
plane of market-determined values of environmental services.
Abildtrup, Jensen, and Dubgaard (2009) demonstrate
through empirical studies (Danish waterworks attempting to frame cultivation agreements with local farmers)
that the Coase theorem fails when its basic assumptions
(zero transaction costs, perfect information, and maximizing behaviour) are violated. They further argue that
expropriation by the state is a much more cost-efficient
approach to protect groundwater resources and ensure
social welfare.
A broader perspective can be seen in the analysis of
Chichilnisky (1994) which considers the trade dynamics
of environmentally-intensive goods between the industrialized (north) and the developing (south) countries. The
environmental resources in the south are state-owned and
hence, are common property. It is a well-known fact that
common property resources are over exploited by business interests. In sharp contrast, Chichilnisky points out
Coasian transaction, embodied in the Coase theorem, is described

as follows:
Assigning property rights to individuals to pollute the environment
or not be polluted from the actions of other individuals would lead
to voluntary negotiations between the concerned individuals resulting in efficient allocation of the resources regardless of the
initial specification of property rights (as cited in Tacconi, 2011, p.
3). The role of the state is limited to the assignment of property
rights. State intervention is required when transaction costs are
high (Coase, 1960).
81
that the north has well-defined property rights and legal

infrastructure for regulating the use of common property
resources like sunlight and running water. She further
argues that the differential property rights regimes between the north and the south lead to a false notion that
the south possesses an over abundance of environmentally-intensive resources in relation to the north leading
to extraction beyond the optimal point and exporting environmentally-intensive goods (timber and cash crops
which require clearing of tropical and temperate forests)
to the north which is not Pareto-efficient. In the Indian
context, the tropical rain forests of the western and eastern ghats are one such state-owned (common property)
resource that has been used as an input for the production of timber, ayurvedic drugs, paper and minerals by
domestic and export-business interests resulting in deforestation and simultaneous accumulation of wealth by
a limited number of private individuals.
In the above context, Chichilnisky (1994) argues that the
basis of trade should be public comparative advantage
and public costs rather than private comparative advantage and private gains. The market underestimates and
does not account for the true social cost of a common
property resource due to market failures and hence such
resources appear to be priced lower by the market. By
improving the property rights of the indigenous forest
communities, she demonstrates that the social costs of
extracting environmental resources would be factored into
the private costs resulting in higher costs of environmental input resources leading to lower comparative advantage and lower exports of environmentally-intensive
goods to the north. Chichilnisky further asserts that improving property rights of indigenous forest communities by providing them entitlements for land and resources
forms a good base for taxing environmental usage and
improving the income levels of the poor. She develops a
mathematical model to illustrate the above concepts but
this is not supported by empirical studies.
Based on the research evidence examined so far, the following is surmised:
Property rights may be considered as intermediate
public goods which are required to ensure the supply
of environmental resources like stable climate, which
is a GPG.
Democratic institutions are associated with evolution
of public policies that are favourable to sustainable
82
management of environmental resources.

Assigning property rights to indigenous communities helps in accounting for social costs of the environmental resource.
We now examine the contours of the property rights of
forest dependent communities in the Indian context. The
recorded forest cover in India is 76.95 million hectares
which comprises 23.41 percent of the total geographic
area (Forest Survey of India, 2011). Out of the 100 million
forest dwellers in India, roughly 54 million belong to the
tribal communities. Since ~95 percent of the forests in
India are state-owned, the privileges and property rights
of forest dependent communities are linked with forest
laws and regulations formulated by the state (Kishwan et
al., 2007).
The Britishers instituted scientific administration of forests during their rule by creating the Forest Department
in 1868 which was based on commercial extraction of
forest produce for export and domestic consumption. The
Britishers declared forests as state property vide the Indian Forest Act, 1865 and the Indian Forest Law Act VII,
1878. The forest dwelling communities were restricted to
certain pockets of the forest territories. The collection of
forest produce by forest dwelling communities and grazing was regulated by the Britishers through subsequent
legislations. The Indian Forest Act, 1927 consolidated the
existing forest laws, regulated the transit of forest products and fixed duties leviable on timber and other forest
produce. This Act also created the Reserved Forests (a
notified area with full degree of protection where all activities are prohibited) and Protected Forests (a notified area with limited degree of protection where activities
are permitted unless prohibited). The National Forest
Policy, 1952 declared forests as National Assets and
forcefully asserted that the interests and priorities of the
forest dwelling communities be made subservient to the
interests of the State. The National Commission on Agriculture, 1976 strengthened the above trend by stipulating
that industrial needs would get priority over the forest
dwelling population in the usage of forest timber. Through
the 42nd Amendment to the Constitution (1976), forests
were transferred from the State list to the Concurrent list,
which gave the Central Government a higher degree of
control in the management of forests. The Wildlife Protection Act, 1972 created the National parks and Wildlife Sanctuaries to improve the habitat conditions and
protection of wildlife. The Forest Conservation Act, 1980
restricted the use of forest land for non-forestry purposes

and required the approval of the Central Government for
any diversion of forest land for non-forestry purposes.2
One can thus discern a progressive tightening of state
control over the management of forests and simultaneous
restriction of the rights and privileges of forest dependent
communities over the access and usage of forest land and
produce in the 19th and 20th centuries. The National
Forest Policy, 1988 reversed the above trend by according
priority to the interests and needs of the forest dependent
communities over national interests. This policy resulted
in the promulgation of the Circular on Joint Forest Management (JFM) in 1990 by the Central Government which
accorded a significant role to the forest dependent communities in the management of forests and devolved rights
to forest produce.
Chakrabarti et al. (2005) trace the evolution of the involvement of forest communities in the management of forests
and environmental resources by the Indian State (1990)
through the principles of co-management / JFM. As observed by the researchers, the forests and other environmental resources, though owned by the state, are
considered as common property resources which have
deteriorated to open access forest systems. The deterioration of forest protection in the state can be traced to institutional factors like paucity of state staff and protection
infrastructure. JFM was evolved to strengthen and supplement the staff strength of the state. Property rights in the
form of limited ownership of lands in reserved forests,
protected forests, national parks and sanctuaries amounting to 200-600 hectares per forest community with rights
to collect non-timber forest produce, share in harvested
timber, wage payments for protection efforts and power
to collect fines from forest offenders have been allocated
by the state to the forest dependent communities. After
ceding forest lands to forest dependent communities as
described above, the State retains ownership control over
approximately 95 percent of the forests in the country
(Sankaran, Sinha, & Madhav, 2008).
Chakrabarti et al. (2005) develop a general equilibrium
model to capture the key aspects of JFM. The model implies that given the importance of caste groups in the In2
Based on the information accessed on May 3, 2012 through http:/

/www.vanashakti.in/evolution.html and Ministry of Environment
and forests, Government of India website http://moef.nic.in/
index.php#
dian social hierarchy, elites in the village forest community may capture a larger share of resources via the property rights in the form of larger share of wage payments
and unauthorized forest resource collections. Non-elites
may be compelled to resort to illegal extraction of forest
biomass for their sustenance. Significantly, they report
considerable empirical evidence suggesting that forests
and environmental resources have been more efficiently
managed through JFM than by the Indian state using indicators like resource extraction levels and distribution
of benefits amongst forest community members.
In another study that reports a puzzling development,
Chakrabarti and Datta (2009) assess the success of the
JFM in the Indian state and report that the programme
has been failing since 2000 and there has been no perceptible increase in afforestation rates as compared to those
in the 1990s. They suggest the development of an integrated management information system (MIS) under four
visions: forestry by communities, forestry for communities, forestry with communities and community forestry,
the latter depicting the highest involvement of the forest
communities in the management of forest resources. The
study suggests that the proposed MIS should contain information about tree growth (already maintained by the
state in the form of plantation journal), shrubs, ground
flora, socio-demographic details of the village forest community, and silvicultural practices.
The State further enacted the Scheduled Tribes and Other
Traditional Forest Dwellers (Recognition of Forest Rights)
Act (TFA), 2006 with a view to accord ownership rights
over lands to forest dependent communities living in the
fringes of the forests subject to certain conditions. The
TFA accords the forest dependent communities with the
right to hold and reside in forest lands under individual
or common occupation, rights over community lands and
rights to collect, use and dispose non-timber and minor
forest produce (Gazette of India Extraordinary, 2007).
As noted by Chakrabarti and Datta (2009), this is a clear
move to improve the property rights of forest communities by the Indian state. In the above context, the proposed
MIS may also include information regarding water bodies, mines and minerals as these resources attract the attention of business interests.
Over the past two decades, the Indian state has taken
progressive steps to improve the property rights and entitlements of the forest dependent communities despite a
83
clear lack of causal relation between the improvement of

property rights of forest communities and increase in forest cover and efficiency in the management of environmental resources. The existing literature in this area offers
no explanation for this puzzling development. This paper seeks to offer insights in this regard and provide some
answers to the questions (1) and (2) posed in the paper
through an analytical case study based on a social entrepreneurship model.
Given the above fact, there is also a possibility of the Indian state withdrawing the property rights given to the
forest dependent communities. As reported by
Chakrabarti et al. (2005), the Chinese state has frequently
resorted to withdrawal of property rights to its forest communities for non-performance and non-fulfillment of contracts between the forest communities and the state. Thus,
there are precedents for withdrawal of property rights by
the state.
THE PROPOSITIONS
We believe that the Indian state has taken a correct and
progressive step in vesting property rights via JFM (1990)
and granting ownership status / titles over forest lands
to forest dependent communities via the TFA (2006). This
is not because the forest communities have shown more
efficiency in managing the forest and environmental resources as reported by several empirical findings mentioned by Chakrabati et al. (2005). On the contrary, we
believe that the loss of forest cover and vegetation due to
browsing/grazing by fodder animal and man-made fires
to rejuvenate grass to facilitate browsing by forest dependent communities for personal profit is considerable. We
formulate the research proposals as follows:
P1: Improving the property rights of forest dependent
communities enables the members to acquire awareness, and education and therefore use the available
financial infrastructure more effectively to increase their
incomes from alternative livelihoods which would
lessen their dependence on forest and its resources for
their living.
P2: Increased incomes from alternative livelihoods of
the forest dependent communities are positively associated with forest cover in the state.
P3: Increased incomes from alternative livelihoods of
the forest dependent communities have a positive
association with the stock market index.
84
P1 and P2 seek to address question 1 while P3 addresses

question 3 posed earlier in the paper. The motivation for
the above proposals stems from the following argument:
It is our belief that the allocation of property rights to
forest dependent communities and entitlements to forest
land provides stability to the individual households in
the form of a residence and some land for cultivation and
rearing draught animals. Ownership of lands would arrest migration of forest communities to nearby towns and
provide benefit from the alternative employment opportunities now made immediately accessible by other economic forces which we explain below. This comfort is in
sharp contrast to the earlier periods where the forest dependent communities were compelled to live in makeshift semi-permanent structures liable for eviction by the
state as trespassing in the forests was considered a forest
offence punishable under the State Forest Act/s.
Public investment dwindled in the 1990s. Due to liberalization and privatization reforms in 1991, private investments filled the void created by the gap in public
investments (Sarker, 2009). Agarwals (2009) findings that
the gross capital formation of the private sector as a percentage of GDP increased from 10.5 percent in 1990-91 to
25 percent in 2006-07 lend further support to this observation. In stark contrast, the corresponding figures for
the state are 8.6 percent and 7.4 percent respectively.
In alignment with the increased investments by the private sector as described above, Agarwal (2009) reports an
increase in the participation of the private sector in new
sectors like road construction, electricity generation and
distribution, health, education and rural development in
the post-liberalization period. Agarwal further notes an
increase in the private sectors presence in ports and
telecom. Rajaraman and Mukhopadhyay (2007), based
on their study on the change in rural employment during
1999-2005, report a rise in rural prosperity as reflected in
the rise in monthly per capita rural expenditure.
Based on the above empirical findings, we posit that the
private sector participation in the rural economy (spanning information technology and services, telecommunications, infrastructure, financial, educational, and other
social services) has generated employment opportunities
in diverse sectors (like eco-tourism, horticulture, education, catering, and other services) in the rural areas during the post-liberalization period which would benefit
the forest dependent communities by providing alterna-
tive employment opportunities for their livelihoods.
be positively associated with the stock market index.
We argue that such alternative employment opportunities shall reduce the dependence of forest dependent communities on forests for their sustenance in the medium
and the long run and lead to increase in forest cover. We
also propose that, under the guidance of the state, these
factors shall enable the forest dependent communities to
effectively network with other institutions in the rural
economy, reduce the transaction costs, use the available
financial infrastructure more effectively, and increase
their incomes.
We finally posit that private sector participation in the

rural economy spanning infrastructure, financial, educational and other services would strengthen the financial infrastructure resulting in access to cheap credit,
innovative insurance products, and rural finance schemes
which has the potential to increase the income levels of
forest dependent communities.
It may be tentatively inferred that increased private sector

participation in the rural economy as described above
leads to a spurt in economic activities at the hamlet and
village levels which may have a ripple effect on the
economy as a whole. This inference provides some pointers to the question no. 3 posed earlier in the paper. The
regional and national stock exchange indices are reasonably good indicators of economic activities. We now examine some evidences which link economic activities at
a regional level and the stock indices.
Padhan (2007) has conducted studies during the post
liberalization period (1991-2005) and reported that a welldeveloped and mature stock market (Bombay Stock Exchange Sensex) would increase economic activities and
economic growth and vice versa. In these studies, Index of
Industrial Production (IIP) was used as a proxy for measuring economic activity and the agricultural sector was
not considered. In a significant study, Agrawalla and
Tuteja (2007) report that improving the efficiency and diversity of Indian stock markets in the current time period
would result in increased economic growth (measured
by IIP) in the future time periods. The researchers further
report that development of the stock market would result
in the development of the banking sector and have concluded that stock markets and banks are complementary
financial services that improve economic growth in the
long run. In a related study, Reddy and Sebastin (2009)
report that the Indian stock market and commodities
market (which trades in derivatives based on oilseeds,
food grains, vegetable oils, spices and bullion) indices
are dependent and hence, move together.
We can thus infer that, in general, economic activities are
positively associated with the stock market index. Increased private sector participation in the rural economy
and the connected increase in economic activities can thus
THE PROPOSED MODEL

We believe that the housing and land assets accrued via
property rights, in conjunction with the employment opportunities provided by a booming economy in the postliberalization period offer alternative livelihoods that
would gradually lessen the dependence of these communities on forests for their food and sustenance and improve their education, health and nutrition levels and
their general standard of living in the long run.
Following Chichilnisky (1994), it can be argued that improvement in property rights of forest dependent communities would enable the correct estimation of the social
cost and price of an environmental resource. Without property rights, the common property resources of the Indian
state were priced only on the basis of private cost as the
social costs were not considered. Inclusion of social costs
would increase the price of environmental resource (lease
rent of forest land for mining, water and so forth) that
would deter vested business interests from unjust profiteering.
A general multiple regression model, by regressing annual per capita income of forest community member on
annual insurance premium, thrift per self-help group
member, education, availed bank loan, area of forest allotted to the forest community and stock index, is proposed to test the research proposals (P1, P2 and P3).
The variables Insurance premium/year and Availed
bank loan seek to measure the strength of financial infrastructure in social rubric of forest dependent communities. Availability of insurance products and banking
services near the habitations of forest dependent communities is perceived as an indicator of the spread of financial infrastructure. Education and Thrift / self help
group number seek to measure the social capital that
would enable members of the forest dependent community members to use the financial infrastructure effectively.
85
THE SOCIAL ENTREPRENEURSHIP VENTURE IN

ANDHRA PRADESH3
The main arguments of the research proposals are now
illustrated through a case study of forest dependent communities based in the state of Andhra Pradesh (AP), India.
The Geography
AP is endowed with rich forests which support a wide
diversity of flora and fauna. Of the total geographical area
of 2,75,068 sq. kms in the State, the forests comprises 63,814
sq. kms (23.2 percent). The state can be geographically
divided into Coastal, Rayalaseema and Telangana regions. Refer to Table 1. The Telangana and Coastal regions are endowed with river systems (Godavari and
Krishna) and rainfall which contribute to rich biodiversity. In contrast, Rayalaseema region, comprising of
Kadapa, Chittoor, Anantapur and Kurnool districts, is
subject to prolonged summers, where the average temperature ranges 41-48 degrees celcius. Rainfall is scanty
in Rayalaseema, averaging 60-90 cms (Andhra Pradesh
State of Forest Report, 2010; Reddy, 1987).
The forest vegetation in Rayalaseema (Reddy, 1987) largely
comprises dry deciduous type with scattered occurrences
of Teak (Tectona grandis), Terminalia spp, Dalbergia spp,
Pterocarpus santalinus, and Anogeissus spp. Rayalaseema
forests contain rare and endemic plants (Cycas beddomei,
Terminalia pallida, Syzygium alternifolium, Shorea talura,
Shorea tumburgia, and Psilotum nudam) and endemic, endangered fauna ( Jerdouns Courser, Golden Gecko, Starbacked tortoise, and Slender Loris).
Administration of Forests by the Government

Organizational Structure
The Principal Chief Conservator of Forests (PCCF) is the
Head of Andhra Pradesh Forest Department (APFD). The
Chief/Conservators of Forests (C/CFs) hold administrative charge of territorial forest circles comprising two or
more districts. The Divisional/District Forest Officers
3
This case study, based on records from the Offices of Divisional

Forest Officer, Wildlife Divisions, Rajampet and Kadapa, Government of Andhra Pradesh, India is adapted from the essay Alternative livelihood programmes for village forest communities (Vana
Samrakshana Samithis) through sustainable management of natural resources in the Rayalaseema region of Andhra Pradesh written by this author and submitted as an entry to the Indian Institute
of Management Bangalore Management Review (IMR) Student
Essay Competition.
86
(DFO), functioning under the jurisdiction of C/CFs, are

responsible for the management and protection of forests
situated in their division/district. The DFO is assisted by
the Forest Range Officer (FRO) at the Range level and the
Forest Section Officer (FSO) at the Section level. The Forest Beat Officer (FBO), assisted by the Assistant Beat Officer (ABO) is in-charge of the Forest Beat, the basic
administrative unit in APFD. As on May 31, 2008, APFD
employed 9,672 officers for the protection, regeneration,
and maintenance of forests in the State.
The executive officers of APFD are empowered to take
cognizance, register offences, and initiate penal action
for forest offences which include theft of forest produce,
damage to forests and forest boundaries, encroachments,
destruction of forest property, and poaching under the
following Central and State Forest Acts:
1)
2)
3)
4)
The Forest Conservation Act, 1980

The Wildlife Protection Act, 1972
The AP Forest Act, 1967
The AP sandal wood and red sanders wood transit
Rules, 1969
5) The AP Saw mill (Regulation) Rules, 19694
Vana Samrakshana Samithi (VSS)

In response to the National Forest Policy, 1988 and the
Circular on JFM issued by the Central Government (1990),
APFD constituted Village Forest Communities, termed as
Vana Samrakshana Samithis (VSS), comprising family
units of forest dependent communities, with a view to
involving these communities in protection and production forestry activities (1992). The VSS, which is basically
a community-based self-help group (rural local body)
derives its spirit and inspiration from the Constitutional
(73rd Amendment) Act, 1992 (Thomas, 2003). While community participation has been successful in the resourcerich Telangana and Coastal regions, Rayalaseema poses
a distinct challenge to the efforts of APFD in this regard
due to its economic backwardness, scarce natural resources, and harsh climatic conditions.
In 2002, the Government of Andhra Pradesh adopted
Community Forest Management (CFM), an advancement
over JFM, which involved more devolution of powers and
property rights to the VSS in the management of its activi4
Records from the Office of the Divisional Forest Officer, Wildlife

Division, Rajampet, Government of Andhra Pradesh, India.
ties. While the VSS was responsible for protection and

management of forests under its charge, it was also expected to provide assistance to APFD in protection of the
remaining forests. The VSS was entitled to all the benefits
accruing from forests managed by it. In respect of plantations, the VSS received benefits in proportion to the period of management of plantation. Viewed from a legal
perspective, the VSS members performing these wage-related and asset-creation works are regarded as forest
workers who derive their basic sustenance and livelihood from forest produce. In this paper, we define forest
workers as follows (Roy-Burman, 1998):
a) Full time or part time wage labour employed by the
Forest Department, Corporations, Co-operatives and
ancillary bodies operating in forestry sectors as well
as by contractors and lessees operating in this sector
on the rights directly or indirectly obtained from the
concerned Forest Department
b) Artisans and craftsmen dependent on forest produce
c) Hunters fully or partly deriving livelihood (in the form
of direct consumption, local barter, and wider commercial linkage) by hunting including trapping birds
and animals whose normal habitats are in the forest
d) Extractors of grass, bamboo, logs and timbers as head
loads for personal use or local sales
e) Gatherers of non-wood forest products
f) Practitioners and users of herbal medicine system
g) Slash and burn cultivators and upland cultivators
who depend on forest primarily to sustain their traditional subsistence economy
h) Farmers, particularly belonging to tribal communities
whose economy is by and large a subsistence economy, which is to a considerable extent dependent on
forest ecology or changes in forest ecology
i) Participants in social forestry programmes (other than
recreational forestry), including JFM primarily for meeting basic consumption needs or for creating social
infrastructure specially meant to serve the vulnerable
sections of the society
k) Population below the poverty line in any category of
forest.
A distinctive feature of the CFM over JFM was the active
involvement of the VSS members, especially women, in
the preparation of management plans and other activities of the forests vested under the control of the VSS. In
alignment with the improved property rights, the VSSs
were entitled to a portion of the penalties collected for
violations of forest laws in VSS-controlled forests.

There are 7,718 VSSs in AP actively involved in the protection and development of forests. These VSSs are managing 15,199.8 sq. kms of forest area, constituting 23.8
percent of the forest area in the State. A total of 15.39 lakh
members are involved out of which 3.23 lakh belong to
the Scheduled Caste and 4.65 lakh to Scheduled Tribe
communities.
The VSSs are funded by the World Bank (APCFM project
2002-07: 5000 VSS), Government of India (Forest Development Agency 2002-07: 1288 VSS) and NABARD (Rural Infrastructure Development Fund schemes: 2055 VSS)
(Andhra Pradesh State of Forest Report, 2010). Refer to
Table 2 for budgetary allocation details under the above
schemes.
Structure of the VSS
The VSS consists of all adult members of concerned communities as its members. The APFD is represented by the
DFO who typically administers 100-200 VSSs. Each VSS
elects one president, one vice-president (one of who must
be a woman) and thirteen other members of whom at least
seven shall be women. Elections are conducted in the presence of the FRO who enlists the support of local NGOs
and gram panchayat to ensure transparent election processes. After the elections, the name of the VSS, details of
the president and vice-president, and the members of the
VSS are registered in the office of the DFO. The DFO then
appoints FRO/FSO/FBO as the member-secretary of the
VSS. Through this administrative structure, APFD implements development schemes for the VSS financed by Government, World Bank and other lending agencies. The
funds from the various lending agencies are deposited in
a joint bank account operated by the VSS functionaries
and DFO. The APFD provides guidance to the VSS for all
the silvicultural operations proposed to be undertaken in
the forest unit.5
The Social Entrepreneurship Model

The social entrepreneurship model seeks to develop employment and alternative livelihood opportunities for the
members of VSS by involving them in the manufacturing
of eco-friendly paper from forest grass, an economically
5

Division, Rajampet, Kadapa district, Government of Andhra
Pradesh, India.
87
insignificant but an abundant natural resource. It is proposed that the paper will be converted into covers and
sold to Tirumala Tirupati Devasthanams, Tirupati (TTD),
the world famous shrine in Tirupati, for packaging the
prasadam. Besides creating employment opportunities for
the members of VSS, the venture ensures positive contribution to biodiversity conservation and fosters beneficial
business associations between the VSS, the TTD, and the
Government.
which the sheets are cut to suitable sizes. The square/

rectangular paper sheets are now converted to covers
using glue. Appropriate holes are punched for provision
of twains for ease of carriage. (List of manufacturers of
paper manufacturing units in India and the details of
plant and machinery required for a single unit, as reported
by Kumarappa National Handmade Paper Institute,
Sanghaner, Jaipur (KNHPI) are enclosed as Annexures 1
and 2).
Product Overview
Risk Factors in Execution6
The product envisaged is rectangular or square paper

covers of various sizes made from pulp of boda (Cymbopogon coloratus), a forest grass, which grows in profusion
over 10,00,000 ha of forests in the Rayalaseema region.
APFD classifies boda grass as a non-nationalized nontimber forest product (NTFP) whose trade is not regulated by the Government (Sankaran et al., 2008). NTFP is
defined as a product of biological origin other than wood
and derived from forests, wooded land or trees outside
the forests and gathered from wild or produced in forest
plantations (Thadani, 2001; FAO, 1999).
1. Power requirements per unit could be in the range 4045 HP. Water is required to wash the alkali off the
boda pulp during the manufacturing process. Further,
the plant has to be installed in a secure place. The
above issues can be addressed by installing the paper
plant in the forest nurseries. Forest nurseries are controlled and maintained presently by APFD for raising
seedlings of appropriate varieties in each mandal or
subdivision. Nurseries with power and water supply
facilities are located at Kadapa, Chittoor, Tirupati and
Pullampet. The VSS is not legally entitled to use forest
nurseries and other resources owned/controlled by
APFD. In its role as facilitator for VSS development,
the APFD has traditionally allowed the VSS unfettered
access and usage of all the resources under its ownership and control, including forest nurseries and plantations.
The four districts have 800 plus VSSs with a forest community population of 132,100 who will be the direct beneficiaries of the project. The VSS members shall be involved
in the cutting, transportation, and storing of boda grass
from forests. The removal of boda grass from the forests
does not constitute a forest offence as the VSSs are legally
entitled to remove and consume boda grass and other
NTFPs for their domestic uses or sell in the local markets
vide the relevant provisions of the Andhra Pradesh Forest Act, 1967 and government orders relating to the JFM
and CFM programmes. The TFA also accords the VSS
rights over NTFPs collected from forests and forest plantations. The machinery plants, which will process boda
and other raw materials to produce paper, will be installed in select locations and will be operated by these
VSSs.
Manufacturing Operations
Boda grass shoots are cut into shreds and mixed with
hosiery shreds to form a pulp, washed with suitable alkali, and subject to beating which renders the pulp amenable for pressing into sheets. The resultant pile of boda
pulp sheets are squeezed and dried under the sun for
removing excess water. Finally, the dried sheets are passed
through calendar rolls to smoothen uneven surfaces after
88
2. Boda shoots are consumed by goats when young and

tender. However, as they grow, the panicles grow
bushy which makes them inedible. Moreover, the grass
is a primary fire incendiary. The best season to collect
boda grass is when they have attained maximum
growth and thus pose a fire hazard. After observing
the yearly growth and maturity patterns of boda grass,
it is concluded that the best season to cut, collect, and
store boda grass is immediately after Makar Sankranti,
i.e., around the second week of January. The collection should be expedited by February. On an average,
one hectare of forest area yields 70 kgs of grass, and
hence 700,00,000 kgs of boda grass are available every
year for the project. Yearly requirement for the above
project is (250 kgs per day x 250 days per year x 18
units =) 11,25,000 kgs. The grass rejuvenates every
year. The grass required for the annual operations are
Ibid.
swathes of economically valuable Red sanders timber

forests and other valuable endemic flora. Boda is a
natural associate of Red sanders and is a prime incendiary for forest fires. To combat this problem, APFD
annually incurs expenditure averaging ` 45 lakh in
each district to remove boda from forests.7 During
uprootal operations, the root systems are also destroyed to prevent boda regeneration which disturbs
the top soil causing soil and moisture erosion. The
stateapproved management or working plans of the
district forests vests APFD with the legal authority to
undertake appropriate silvicultural operations (which
include uprootal of dry grass, periodic burning, soil
binding operations and so forth) to prevent the forests
under its control from natural and anthropogenic damage. Such silvicultural operations derived from the
management or working plan, when undertaken by
the VSS under the guidance of APFD, are necessary
for the health and development of forests. Hence, they
do not constitute a violation of the Forest Conservation Act, 1980. Presently, TTD is using plastic covers
for packaging prasadam of the Lord which has resulted
in littering of plastic in SVNP forests. Frequently deer,
sambar and other ungulates ingest the plastic covers
along with natural food which results in choking and
death. During forest fires in summer, the plastic covers strewn by tourists and pilgrims get burnt along
with forest litter in the hill zone which pollute the
atmosphere. Following the spirit and provisions of
the Wildlife Protection Act, 1972, the judiciary had
issued directions to TTD to ensure a ban on the use of
plastic covers/articles in the Tirumala Tirupati hill
zone, which harbours rich biodiversity and is home
to many endangered species (Slender loris, Cycas
beddomei). The proposed use of grass-based paper
cover, in place of plastic covers, will address this problem.8
collected during this period and stocked in the forest

nurseries.
3. Suitable youths, preferably those who have attained
literacy, and local NGOs will be selected from the VSSs
and sent to KNHPI for training. Such trainings are
necessary during the initial phases and would be
sponsored by APFD. Around twenty persons are required to run a unit in its entirety. APFD and the VSS
are already engaging the services and support of local
NGOs for book-keeping and accounts maintenance of
various forestry schemes implemented in the VSS. This
structure will also help the VSS in maintaining the
accounts for this project at various levels including
boda grass stocking points and nurseries.
4. Value additions are required to convert the pressed
handmade raw papers to suitable covers/envelopes.
Waxing, adding laces, and ring bushes enhance the
utility of the product. Such value additions are not
possible by VSS members with their existing level of
skills. It is thereby proposed to involve the Self Help
Groups (SHG) presently functioning in the gram
panchayats in the value addition processes.
5. KNHPI shall be entrusted with the task of installing
the machinery required for the paper plant in the proposed sites in AP.
6. Hosiery cotton rags are required to strengthen the boda
grass pulp. For the supply of rags on a continuous
basis, the VSSs can enter into an arrangement with
textile mills in nearby towns like Nagiri and Puthur,
Chittoor district.
7. There is a possibility of some pollution effects near the
paper manufacturing units as alkali is being used to
wash the pulp. The excess alkali-laden water can be
collected in a nearby pit or drum near the plant itself,
on a daily basis. This impure mass can be treated with
suitable dilute acid (like hydro chloric acid) which
will neutralize the base. The standing impurities can
be precipitated by using small quantities of alum. The
relatively unpolluted water can then be released or
put to suitable domestic uses.
2. In the manufacturing processes of boda based paper,

only the shoots of boda grass are used for extracting
pulp, while the roots, which are excellent soil binders,
are left undisturbed as the future plant stock. Hence,
soil erosion is minimized.
3. Cutting, transportation, storage, and collection of boda
Benefits of the Product

1. TTD temples are situated in Tirumala hills amidst the
forests of Sri Venkateshwara National Park (SVNP),
an ecologically fragile eco zone which contains vast
Ibid.
Records from the Office of Sri Venkateshawara Zoological Park,

Government of Andhra Pradesh, Tirupati, India.
89
grass provide employment opportunities to the VSS

in these districts. The wage rates for these operations
are based on the notification by the respective district
collectors in accordance with the provisions of the
Minimum Wages Act, 1948 and its subsequent amendments. Further, the forests contain valuable red sanders timber species which are prone to smuggling in
view of the enormous demand for its timber in Japan
and China. Red sanders grow on hill slopes in the
remote forests. Smugglers and poachers use this isolation to their advantage and wreak havoc on the
biodiversity by resorting to massive felling of these
trees to smuggle timber. APFD is faced with an uphill
situation in view of insufficient staff and moderate
infrastructure. Movement of people and labour in these
forests to harvest boda grass would aid APFD in checking the smuggling activities described above.
Value Proposition
TTD has evinced keen interest in purchasing the above
product as the use of grass-based paper covers ensures
compliance with legal statutes. By promoting the use of
an eco-friendly product manufactured by involving VSSs,
TTD stands to gain enormous social and political benefits. The competitive advantage, under the present circumstances, is that the product is eco-friendly and has
an ethnic origin.9 TTD is a semi-autonomous government
institution and would prefer to do business which will
provide livelihood opportunities to VSS. The state-run
KNHPI had conducted detailed tests on boda grass and
reported that the grass was a suitable raw material for
manufacturing paper. The paper can also be converted
into other products like file covers, greeting cards, moon
rock paper, marble paper and folders which can be sold
through the state handicraft emporiums.10
The economic value of the social entrepreneurship venture is based on the report furnished by KNHPI and current market rates of various raw materials used in
manufacturing the eco-friendly paper. One unit can produce 200 kgs of paper per day, equivalent to 4,000 covers
(size: 12 x 5 x 3 as required by TTD). In over 250 working days in a year, one unit can produce 1,000,000 covers.
Cost of each cover is estimated at ` 2.09 and is proposed
9
Records from the Office of the Executive Officer, Tirumala Tirupati

Devasthanams, Government of Andhra Pradesh, Tirupati, India.
10
Records from the Office of the State Silviculturist, Biotechnology

Research Centre, Government of Andhra Pradesh, Tirupati, India.
90
to be sold to TTD at ` 2.70. Revenue per unit per year is (`

2.70 per cover x 1,000,000 =) ` 27,00,000. Variable and
fixed costs per unit per year are ` 15,18,750 and ` 5,75,500
respectively.
Net profit per unit per year is ` 4,24,025 after tax and
interest deductions. Break-even occurs at the sale of
4,87,196 covers per unit after 0.49 years. There is a need
for eighteen such units to meet the demand of 18,000,000
covers per year by TTD temples. Refer to Annexure 3 Financial Analysis for details.
Market Analysis
TTD attracts pilgrims and tourists from all over the world,
cutting across caste and religion and averaging 3,50,000
every week. Every devotee/ pilgrim/ tourist who visits
TTD would want to consume prasadam and carry it home
and hence, is a customer. The annual requirement for TTD
is estimated at 18,000,000 paper covers. The VSS can access customers through TTD. Each paper cover can contain 4-8 laddus or 3 vadas.
There is also scope for selling the hand-made paper products through the state emporium outlets like Cauvery
(Karnataka) and Lepakshi (AP).
Financial Planning
An investment of `36,00,000 per unit is required for initial start up. `15,00,000 per unit is required for procuring
and installing plant and machinery. The balance of
`21,00,000 per unit is required for various operating expenses like procurement of boda grass, hosiery rags,
chemicals and so on. A minimum of 18 such units are
required to satisfy the demand by TTD necessitating an
investment of `6,48,00,000. Two alternative approaches
are proposed for the execution of the above project:
1) The government and TTD can finance the venture as a
one-time grant or a loan to the concerned VSS at low
rates of interest.
2) The VSS can raise loans from the interested parties in
the corporate sector for the venture.
In Approach (1) the promoters of the venture would be
the government and TTD, the latter being the major client
for the product. The government and/or TTD would fully
fund the project as a one-time grant or a loan with low
rates of interest. The assets created would be under the
ownership of the concerned VSS and the profits would
accrue to the VSS. Yearly interest payments, if applicable,

would be paid from the revenue accruals to the Government and /or TTD.
Approach (2) envisages participation of the corporate
sector as a major stakeholder in a tripartite arrangement
between the Government, VSS, and the corporate entity.
The VSSs will retain the ownership rights of the assets.
The corporate entity would invest whole or in part and
would be entitled to interest (20%) and principal repayment from the share in the net profits of `4,24,025 per unit
per year earned by the VSS. The payback period is calculated at 14.43 years. The NPV of the project is estimated at
`100,53,750 assuming an interest rate of 20 percent in
view of the moderate risks involved in the project.
fires which adversely affect forest vegetation. The model

further envisages active participation by the private sector. Social entrepreneurship via improved property rights
as described above has thus enabled the forest communities to enter into cooperative arrangements with other
stakeholders to explore opportunities for alternative
sources of income. Such interactions and exchange of information with the outside environment would increase
the awareness and education levels of forest dependent
communities which would enable them to effectively use
the financial infrastructure to attain a higher standard of
living.
DISCUSSION
Stakeholder Cooperation
Scalability
Many species of coarse grass, similar to Boda grass, occur in the revenue lands and non-forest areas of the state.
Using non-forest grass as raw material for eco-friendly
paper would further reduce the dependence of forest communities on boda grass occurring in forests. These grasses
could also be sent to KNHPI to determine their strength
and applicability for making paper. If suitable, similar
activities for manufacturing paper can be envisaged by
village forest communities present in the various states of
India. Finding steady customers, in case of paper covers,
would pose a minor challenge to village forest communities outside AP in view of the relatively high prices per
unit of grass-based covers vis--vis plastic polythene covers.
The state has approved the entrepreneurship model described above and have provided the required financial
assistance. A pilot paper unit has been installed in
Kadapa distict with the technical assistance of KNHPI
(2009-10).11 The forest dependent communities of the district have benefited from the alternative livelihood and
employment opportunities accorded by the project.
As can be noted in the above model, the improvement of
property rights by the State has enabled the forest dependent communities to harvest boda grass occurring in the
forests for manufacturing eco-friendly paper which provides alternative sources of livelihood to these communities. The removal of boda grass may also prevent forest
11

Division, Kadapa District, Government of Andhra Pradesh, India.
The Entrepreneurship Model seeks to establish a competitive advantage by drawing on the strengths of each of
the stakeholders (the state represented by the APFD, the
forest dependent communities, and the TTD) and exchanging information for the successful management of
the venture. Turnbull (1997) emphasizes such stakeholder
cooperation for developing competitive advantage and
self-regulation among key stakeholders by analysing the
Japanese keiretsu and cooperatives in Mondragon, Spain
and asserts that self regulation would minimize the costs
of regulation. In the context of the social entrepreneurship model described above, we believe that providing
more education and financial infrastructure in the form
of thrift groups, accounting knowledge, and insurance
services would enable the forest dependent communities
to self-regulate their activities.
In addition, the social entrepreneurship model also envisages sharing benefits with the private sector who might
be interested in participating in the venture. There is also
the possibility of misuse of the costly equipment and under-reporting by either party to the contract in the above
scenario. Such types of transaction costs have been
pointed out by Datta and Nugent (1989) in their general
analysis of transaction cost economics that suggested
long-term lease contracts to reduce such costs. Such specific economic and financial instruments need to be designed appropriately to address the issues in the model.
Transaction Costs
Considering each transaction as a basic unit of analysis
in the proposed model, we draw on the study of Datta,
91
Sen, and Gupta (1994) to describe the sources of transaction costs and a suitable model to prescribe a governance
structure for smoothening of the economic relations between the stakeholders involved in the above set of economic transactions. Datta, Sen, and Gupta have identified
three components which give rise to transaction costs:
bounded rationality, opportunism, and asset-specificity.
The case study described here highlights that ex ante transaction costs may not be as high as ex post transaction
costs. The ex post transaction costs (monitoring costs and
costs of operating the governance structure) between the
federation of forest dependent communities, the state, and
the private sector may be high.
The resource-dependence perspective may be appropriate here as the forest dependent communities control access to crucial raw materials like boda forest grass and
labour. According to the Swedish School of thought/
Uppsala network, markets are looked upon as a network
and firms are interdependent upon each other for gaining access to resources (Datta et al., 1994).
Applying the above framework to the entrepreneurship
model, one can visualize that coordination between the
TTD, forest communities, and the State can be achieved
and fostered through specific long-term cordial relationships which can accelerate information exchange, reduce
transaction costs, provide an indirect form of control, and
provide opportunities for beneficial exchanges with other
firms and organizations (as in other famous temples
which might evince interest in using the eco-friendly paper bags). Further, goal attainment cannot be measured
precisely in this Entrepreneurship Model as its success is
defined by relatively intangible social objectives like alleviation of poverty, developing social capital, and improving the standard of living of forest communities besides
tangible parameters like profit after tax and revenue accruals. As highlighted by Datta et al. (1994), the premise
control based on autonomy, goodwill, and trust might
be the appropriate type of control structure for the above
model.
Governance Structures
The Entrepreneurship Model described above is not a
state-owned public enterprise. Nor is it a proprietorship
managed by a single owner or entrepreneur. The Entrepreneurship Model discussed here strives to maximize
its profits and hence, it is not a non-profit organization
either. The Model cannot be described as a mutually-
92
owned workers cooperative as members of VSS cannot

claim ownership rights over the plant and machinery,
work sites, boda grass, other raw materials or the manufactured paper.
The model can be described as a cooperative organization owned and run by a federation of forest communities. There are no managers appointed to oversee and
monitor the operation of this organization. The model
does not operate under perfect competition either. Under
the above constraints, it is not possible to precisely determine its boundaries.
We analyse the above model in the perspective of the
modern theory of the firm as described by Spulber (2009).
Spulber defines a firm as an institution that enters into
transactions and whose goals and objectives are different from the objectives of its owners. According to Spulber,
this separation of goals is the most important characteristic that differentiates a firm and direct exchange between
consumers. This separation of objectives from the owners
and the firm is embodied in the famous Fisher Separation Theorem. Spulber argues that firms are the most
efficient forms of organization. The Entrepreneurship
Model depicted herein clearly does not fulfill the Spulber
criterion and hence does not qualify to be classified as a
firm when analysed in the above perspective (Spulber,
2009).
However, the Entrepreneurship Model has been viable
and has performed well as on date. Given the set of constraints with reference to property rights of forests, no
other form of organization has been found to be workable.
As pointed out by Hart (2011), many natural firms like
Microsoft and Google also fail the Spulber criterion. The
intellectual and logical deficiency of the Spulber criterion
as described above needs to be reconciled. A step in this
direction has been initiated by modern researchers who
derive the behaviour of organizations from fundamental
features like administrative rules, governance structures,
and employee incentives and not from the stated objectives of the firm (Hart, 2011).
Social Implications
The Entrepreneurship Model described above, seeking to
maximize the benefits accruing from improved property
rights to the forest dependent communities, may have
further social implications. The benefits of the entrepreneurship project (continuous wage employment, opportunities for training in paper making, accountancy and
book-keeping, education) would be good encouragement
for the VSS in other districts to emulate the project. Increase in incomes of the VSS members involved in the
entrepreneurship project would improve their standard
of living and arrest migration to urban centres for searching jobs during the lean agricultural/forestry seasons.
More important, the marginal productivity of labour in
agriculture/forestry will rise.
Generally speaking, improvement in property rights of
the forest dependent communities would increase the
social capital in the long run as indicated in the Entrepreneurship Model. On the negative side, attempts to improve the property rights of forest dependent communities
might result in social tensions. The implementation of
TFA in the Indian context is a good example to illustrate
these negative social effects. There would be a tendency
for vested interests (posing as forest dwellers) to lay false
claims of ownership and rights over forest land under
TFA resulting in wasteful litigation and sabotage which
might violate the spirit of TFA.
To claim rights under TFA, the individual must primarily reside in forests, depend on forests for a livelihood,
belong to scheduled tribe, or must have been a resident in
forests for seventy-five years in case the individual does
not belong to the Scheduled Tribe category (Gazette of
India Extraordinary, 2007); claims of ownership over forest land is limited to those lands farmed by forest dwellers as on December 31, 2005, subject to a maximum of 4
hectares per family.
Outside interference by local politicians and caste groups
to support the vested interests can complicate the issue
and victimize the forest dependent communities. The state
has to initiate measures to protect the forest communities
from such events.
dependent communities leading to the formation of a

landed class may result in drawing this marginalized
section of the population into mainstream politics resulting in heightened awareness of their rights and privileges and participation in mainstream politics.
The state needs to initiate action to improve the education levels of the forest dependent population through
adult literacy campaigns for ensuring effective and meaningful political participation. There is a probability that
the gullible forest dependent communities, lacking proper
education and awareness but now enriched with property rights and titles, may fall prey to the vested political
interests.
Legal Implications
In vesting individual and communal property titles over
forest lands to the forest dependent population, a legal
problem may precipitate. Usage rights over NTFP by the
forest dependent communities do not present legal issues
as the status of the assigned forest land is treated as forest land in the land records. However, the forest lands
over which titles are awarded to forest dwellers are typical habitats of forest fauna whose eviction or translocation is not possible. In the Indian context, the management
and protection of forest fauna is governed by the Wildlife
Conservation Act, 1972 and the Forest Conservation Act,
1980. It must also be noted that the meaning of forest
has been broadened to be understood in accordance with
the dictionary meaning irrespective of the nature of ownership and classification in the land records as ordered
by the Honourable Supreme Court of India in the T. N.
Godavarman Thirumulpad vs Union of India and others
(1996) case12. There is considerable ambiguity and confusion amongst the regulatory authorities in the application of Wildlife Conservation Act, 1972 and Forest
Conservation Act, 1980 for wildlife offences committed
in the forest lands assigned to forest dependent communities under TFA. There is a need for the state to clarify
the above legal issue.
Political Implications
Improving property rights of forest dependent communities leading to title and usage rights may result in the
formation of a landed class in the Indian rural fabric. A
sizeable section of the forest dependent population has
remained outside the political mainstream in view of the
geographical inaccessibility of the forests and their migratory life style. Granting property rights to the forest
Managerial Implications
Considerable responsibility and commitment is required
on the part of government officers in the lower, middle,
and top levels of forest, tribal affairs, and general admin12
Based on information accessed on May 26, 2012 through http://

www.doccentre.net/docsweb/adivasis_&_forests/godavarman.htm
93
istration departments vested with the duty of improving

the property rights of forest dependent communities. A
change in managerial mindset is necessary in order to
regard the forest dependent communities as equal partners in the growth and developmental process. Such attitudinal changes amongst the managerial class can be
wrought through suitable cross-cultural training modules with a focus on mutual appreciation of different cultures and society.
CONCLUSIONS AND DIRECTIONS FOR

FURTHER RESEARCH
It is not sufficient to improve the property rights over usage of NTFPs and grant titles over forest lands of the forest dependent communities. The State has to take
simultaneous initiatives to improve their education and
awareness levels to enable them to effectively benefit from
the assigned property rights. The Social Entrepreneurship Venture in Andhra Pradesh describes how the VSS
members, under the guidance of APFD, can organize themselves and through stakeholder cooperation and networking, create alternative livelihood opportunities and
profitable ventures using forest resources that have
miniscule economic value. It can thus be concluded that
improving the property rights of the forest dependent
communities, duly supplemented with education, would
enhance labour productivity, and social and human capital in the medium and long run. With the rise in their
incomes and standard of living due to improved property rights, the forest dependent communities can be expected to actively and meaningfully participate in the
mainstream politics and economic development processes
of the state. The political, social, and legal issues that
may arise in the process of improving the property rights
of forest dependent communities have been described and
94
possible solutions have been spelt out.

An obvious limitation of the paper is that it seeks to develop the theory without empirical support. The theory
would hopefully augment the existing knowledge in
property rights studies of forest dependent communities
in the Indian context.
We believe that all the proposals offered in the paper
would be empirically supported. The Entrepreneurship
Model discussed provides some affirmative answers to
the questions 1 and 2 posed in the paper. The paper also
attempts to identify the determinants of the income of the
elusive forest dependent communities in the contemporary Indian context. Not too many empirical studies are
available in this area. In view of the inaccessibility of forest dependent communities and their present exclusion
from the mainstream, it would be difficult to obtain reliable and relevant data to empirically test the research
proposals.
Further, the TFA, enacted by the state of Andhra Pradesh
in 2006, which envisages vesting of ownership rights over
forest land to forest dependent communities, is presently
under implementation. The resulting social and economic
activities would hopefully generate reliable data on the
socio-economic variables of this elusive demographic sector. Future research may use this data to test the research
proposals presented in the paper and assess the impact
of the improvement in property rights on the standards of
living of the forest dependent communities. These empirical results would also provide some tentative answers
to question 3 posed in this paper. Further research can
also identify more determinants which may help policy
makers to draw suitable strategies to improve the living
conditions of forest dependent communities.
Table 113: District-wise Distribution of Geographical and Forest Areas with Population Percentage and Per Capita
Forest Areas in AP
No.
District
Geographical
Area
(Sq. Kms)
Forest
Block
Number
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Total
Adilabad
Nizamabad
Medak
Rangareddy
Hyderabad
Mahabubnagar
Nalgonda
Karimnagar
Warangal
Khammam
16,128
7,956
9,699
7,493
217
18,432
14,240
11,823
12,846
16,029
1,14,863
235
189
233
127
86
26
201
112
356
155
11.
12.
13.
14.
15.
16.
17.
18.
19.
Total
Srikakulam
Vizianagaram
Visakhapatnam
East Godavari
West Godavari
Krishna
Guntur
Prakasham
Nellore
5,837
6,539
10,807
11,161
7,742
8,727
11,391
17,626
13,076
92,906
79
103
188
161
50
60
118
130
268
1,157
17,658
15,359
19,130
15,152
67,299
2,75,068
103
154
103
184
544
3,266
20. Kurnool
21. Cuddapah
22. Anantapur
23. Chittoor
Total
Andhra Pradesh
Forest
Area
(Sq. Kms)
Population
in Lakhs
2001
census
Telangana
7,231.89
24.79
1,812.15
23.43
905.94
26.62
730.75
35.07
36.86
3,032.51
35.07
836.93
32.38
2,554.86
34.77
3,713.14
32.31
8,436.94
25.67
29,242.08
306.97
Coastal Andhra
686.41
25.28
1,193.03
22.45
4,411.66
37.90
3,232.44
48.73
811.66
37.96
664.28
42.18
1,619.41
44.06
4,424.99
30.55
2,519.37
26.60
19,563.25
315.70
Rayalaseema
3,515.49
35.12
5,002.95
25.73
1,969.78
36.39
4,520.18
37.35
15,008.40
134.59
63,813.73
757.27
Percentage
of Forest Area
to the Total
Geographical
Area
Percentage
of District-wise
Forest Area to
Total Forest
Area in AP
Per Capita
Forest
Areas (ha)
44.8
22.6
9.4
9.7
16.5
5.9
21.6
28.8
52.6
25.46
11.32
2.84
1.42
1.15
4.75
1.31
4.00
5.82
13.52
45.82
0.35
0.09
0.04
0.03
0.10
0.03
0.08
0.13
0.38
0.11
11.9
18.83
39.3
29.9
10.4
7.6
14.2
25.1
19.2
21.06
1.08
1.87
6.92
5.07
12.73
1.04
2.54
6.94
3.95
30.66
0.03
0.06
6.13
0.07
0.02
0.02
0.04
0.16
0.8
0.07
19.8
32.7
10.3
29.9
22.30
23.20
5.51
7.84
3.09
7.09
23.52
100.00
0.12
0.22
0.06
0.14
0.30
0.10
Table 214: Budgetary Allocation for Forestry Works Allotted to VSSs in AP

Scheme
World Bank assisted APCFM (2002-07)
Forest Development Agency (2002-07)
RIDF schemes NABARD ( 1998 till date)
Total outlay
Budgetary Allocation (Rcrores)

653.97
76.92
106.48
837.37
Note. APCFM Andhra Pradesh Community Forest Management; NABARD National Bank for Agriculture and Rural Development;
RIDF Rural Infrastructure Development Fund.
13
Based on Andhra Pradesh State of Forest Report 2010 accessed on October 18, 2011 through http://forest.ap.nic.in
14
Ibid.
95
Annexure 1: List of Machinery Manufacturers for Paper Manufacturing from Boda Grass
1. BRAMCO ENGINEERS
E-55-56, Industrial Area,
Yamuna Nagar - 135 001 (Haryana)
Phone: 01732-250231; Fax: 01732-251110
2. GURPAL ENGINEERING WORKS,
Near Bus Stand, Jagadhari.
Yamuna Nagar - 135 001 (Haryana)
Phone: 01732-230008, 01732-225857
3. UMESH INDUSTRIES
132- A Vijay Nagar Opp. Kamala Palace
Ghaziabad 201 001(U.P.)
Phone: 0120-24741137(O); 0120-24740744(R); Fax: 0120- 24716177
4. HINDUSTAN PAPER( MACHINERY) INDUSTRIES
E-67, Industrial Area
Sirret No.1, Bulandshehar Road,
Ghaziabad - 201 001
Phone: 0120-24700613; 0120-24700563
5. SITSON INDIA
W-76, M. I. D. C., Phase II,
Dombivli (East), Dist. Thane - 421 204
Annexure 2: Machinery and Equipment for Paper Manufacturing from Boda Grass
Particulars
Price (`)
Horsepower (hp)
Rags chopper
35,000
Grass cutter
30,000
Rotatory digester
2,20,000
Beater (24"X30")
1,60,000
15
60,000
1,70,000
Guillotine machine
60,000
Submersible pump
25,000
3,00,000
Motorised screw press

Calendering machine 12x36
Non Ibr boiler

Autovat (4 Nos)
80,000
Tausoki dryer
20,000
Weighing machine
20,000
Total
11,80,000
Total of machinery & motors
Couching table, felts, storage tanks

Transportation & packing charges
96
46
11,80,000
Installation charges, electrical & pipe fitting (10%)

Furniture & fixture
Price (`)
1,18,000
20,000
40,000
1,18,000
Misc.
24,000
Total
15,00,000
Annexure 3: Financial Analysis

Production Costs, Revenue Details and Financial Analysis of Boda Grass-Based Paper Covers
(Production from Single Unit)
Demand from TTD per annum (covers)
Selling price per cover
2.70
Loan amount
3,600,000
Investment per plant
1,500,000
No. of plants
Plant capacity (no. of covers/day)
Amount in `
18,000,000
1
4,000
Production per year (no. of covers)
1,000,000
Total revenue
2,700,000
Expenses
Boda grass
625,000
Interest rate
5%
Rags
Depreciation rate
5%
Chemicals
112,500
Power, fuel & water
237,500
Transportation
200,000
Packaging & customization
250,000
Salary
288,000
No. of persons per plant
12
Production days per year
250
Discount rate
20%
Grass requirement per cover (kg)
0.0625
Rags requirement per cover (kg)
0.01875
Insurance
Interest on loan
Cost of grass per kg
10
Cost of rags per kg
Cost of chemicals per kg of grass requirement
1.80
Cost of power, fuel & water per cover
0.24
Cost of repair & maintenance per plant per

day of production
50
Cost of packaging and customization per cover

Insurance
Salary per person per month
0.25
20,000
2,000
Transportation costs per cover

No. of months per year
0.20
12
20,000
180,000
Depreciation
75,000
Repair & maintenance
12,500
Total cost of production

Total cost of production per cover
Profit before tax
2,094,250
2.09
605,750
Tax @ 30%
181,725
Profit after tax
424,025
Annual cash flow per year
499,025
Payback period in years

Net present value (considering cash flows
for 20 years) @ 20%
93,750
14
558,542
97
Break-even Analysis of Boda Grass-based Paper Production (Single Unit)

Cost Description
Fixed Costs (`)
Variable Costs (`)
Variable costs
Raw materials
Transportation
Packaging and customization
Power, fuel, & water
831,250
200,000
250,000
237,500
Fixed costs
Salaries (includes payroll taxes)
Repairs & Maintenance
Insurance
Interest
Depreciation
Total fixed costs
288,000
12,500
20,000
180,000
75,000
575,500
Total variable costs

Total variable costs per cover
Break-even sale (no. of covers) =
Break-even year =
1,518,750
1.52
487,196
0.49
Break-even Graph
No. of years
Total revenue (`)
No. of Years
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
98
Total cost (`)
No. of Covers
Fixed Cost (`)
Variable Cost (`)
Total Cost (`)
100000
200000
300000
400000
500000
600000
700000
800000
900000
575,500
575,500
575,500
575,500
575,500
575,500
575,500
575,500
575,500
151,875
303,750
455,625
607,500
759,375
911,250
1,063,125
1,215,000
1,366,875
727,375
879,250
1,031,125
1,183,000
1,334,875
1,486,750
1,638,625
1,790,500
1,942,375
Total Revenue (`)

270,000
540,000
810,000
1,080,000
1,350,000
1,620,000
1,890,000
2,160,000
2,430,000
Production Costs, Revenue Details and Financial Analysis of Boda Grass-Based Paper Covers
(Production from 18 Units)
Demand from TTD per annum (covers)
Selling price per cover
2.70
Loan amount per plant

Investment per plant
Production per year (no. of covers)
18,000,000
3,600,000
Total revenue
48,600,000
1,500,000
Expenses
No. of plants
Plant capacity (no. of covers/day)
Total loan amount for 18 units
Amount in `
18,000,000
18
4,000
64,800,000
Boda grass
11,250,000
Rags
1,687,500
Chemicals
2,025,000
Interest rate
5%
Power, fuel, & Water
4,275,000
Depreciation rate
5%
Transportation
3,600,000
Packaging & Customization
4,500,000
Salary
5,184,000
No. of persons per plant
12
Production days per year
250
Discount rate
20%
Grass requirement per cover (kg)
0.0625
Rags requirement per cover (kg)
0.01875
Insurance
Interest on loan
3,240,000
Depreciation
1,350,000
Cost of grass per kg
10
Repair & Maintenance
Cost of rags per kg
Total cost of production
Cost of chemicals per kg of grass requirement
1.80
Cost of power, fuel, & water per cover
0.24
Cost of repair & Maintenance per plant per

day of production
Salary per person per month
Total cost of production per cover
225,000
37,696,500
2.09
50
Profit before tax
Cost of packaging and customization per cover

Insurance per plant
360,000
0.25
20,000
Tax @ 30%
Profit after tax
10,903,500
3,271,050
7632450
2,000
Transportation costs per cover

No. of months per year
0.20
Annual cash flow per year
8,982,450
12
Payback period in years
Net present value (Considering cash flows
for 20 years) @ 20%
14.43
10053750
It is hereby proposed that half of annual cash flow accrues to

VSS and the other half towards loan repayment (if financed by
loan). In case of grants from Government or TTD, the cash flow
can accrue as income to the VSS from year 1.
99
Break-even Analysis of Boda Grass-based Paper Production (18 Units)

Cost Description
Variable costs
Raw materials
Transportation
Packaging & Customization
Power, fuel, & Water
Fixed Costs (`)
Variable Costs (`)

14,962,500
3,600,000
4,500,000
4,275,000
Fixed costs
Salaries (includes payroll taxes)
Repairs & Maintenance
Insurance
Interest
Depreciation
Total fixed costs
5,184,000
225,000
360,000
3,240,000
1,350,000
10,359,000
Total variable costs

Total variable costs per cover
Break-even sale (no. of Covers) =
Break-even year =
27,337,500
1.52
8,769,524
0.49
Break-even Graph
No. of years
Total revenue (`)
No. of Years
0.45
0.46
0.47
0.48
0.49
0.51
0.52
0.53
0.54
100
No. of Covers
Fixed Cost (`)
Variable Cost (`)
8,100,000
8,300,000
8,500,000
8,700,000
8,900,000
9,100,000
9,300,000
9,500,000
9,700,000
10,359,000
10,359,000
10,359,000
10,359,000
10,359,000
10,359,000
10,359,000
10,359,000
10,359,000
12,301,875
12,605,625
12,909,375
13,213,125
13,516,875
13,820,625
14,124,375
14,428,125
14,731,875
Total cost (`)
Total Cost (`)

22,660,875
22,964,625
23,268,375
23,572,125
23,875,875
24,179,625
24,483,375
24,787,125
25,090,875
Total Revenue (`)

21,870,000
22,410,000
22,950,000
23,490,000
24,030,000
24,570,000
25,110,000
25,650,000
26,190,000
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B. Sundar is a student in the Economics Area of the Fellow

Programme in Management (IV Year) at IIM Ahmedabad and
an officer of the Indian Forest Service with exposure in the
forest and the rural development sectors. He also holds a
PGDM from IIM Indore and was serving as President (Fi-
102
nance), Sri Venkateshwara Bhakthi Channel, TTD, Triupati

prior to joining the Fellow Programme.
e-mail: sundarb@iimahd.ernet.in
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NOTES AND

An Analysis of the Property Rights

VIKALPA VOLUME 38 NO 3 JULY - SEPTEMBER 2013

1. Does vesting of property rights over land and natural

property rights over environmental resources aimed at

We begin by examining the meaning of property rights,

Despite the ambiguous conceptualization of property

Referring to the pithy example of resource-poor Indians

According to Clunies-Ross (2004), GPGs not only include

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

ever, the researchers also report that effect of democratic

Coasian transaction, embodied in the Coase theorem, is described

that the north has well-defined property rights and legal

management of environmental resources.

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

restricted the use of forest land for non-forestry purposes

Based on the information accessed on May 3, 2012 through http:/

VIKALPA VOLUME 38 NO 3 JULY - SEPTEMBER 2013

clear lack of causal relation between the improvement of

P1 and P2 seek to address question 1 while P3 addresses

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

tive employment opportunities for their livelihoods.

be positively associated with the stock market index.

We finally posit that private sector participation in the

It may be tentatively inferred that increased private sector

THE PROPOSED MODEL

THE SOCIAL ENTREPRENEURSHIP VENTURE IN

Administration of Forests by the Government

This case study, based on records from the Offices of Divisional

(DFO), functioning under the jurisdiction of C/CFs, are

The Forest Conservation Act, 1980

Vana Samrakshana Samithi (VSS)

Records from the Office of the Divisional Forest Officer, Wildlife

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

ties. While the VSS was responsible for protection and

violations of forest laws in VSS-controlled forests.

The Social Entrepreneurship Model

Records from the Office of the Divisional Forest Officer, Wildlife

which the sheets are cut to suitable sizes. The square/

Risk Factors in Execution6

The product envisaged is rectangular or square paper

2. Boda shoots are consumed by goats when young and

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

swathes of economically valuable Red sanders timber

collected during this period and stocked in the forest

2. In the manufacturing processes of boda based paper,

Benefits of the Product

Records from the Office of Sri Venkateshawara Zoological Park,

grass provide employment opportunities to the VSS

Records from the Office of the Executive Officer, Tirumala Tirupati

Records from the Office of the State Silviculturist, Biotechnology

to be sold to TTD at ` 2.70. Revenue per unit per year is (`

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

accrue to the VSS. Yearly interest payments, if applicable,

fires which adversely affect forest vegetation. The model

Records from the Office of the Divisional Forest Officer, Wildlife

VIKALPA VOLUME 38 NO 3 JULY - SEPTEMBER 2013

owned workers cooperative as members of VSS cannot

AN ANALYSIS OF THE PROPERTY RIGHTS OF FOREST DEPENDENT COMMUNITIES...

dependent communities leading to the formation of a

Based on information accessed on May 26, 2012 through http://

istration departments vested with the duty of improving

CONCLUSIONS AND DIRECTIONS FOR