The Union government recently clarified how environmental penalty funds should be used, which is a shift from past practices. This move aims to better manage the funds collected from pollution penalties imposed under laws like the Air Act and Water Act.
For years, state pollution control boards collected these penalties but had a lot of freedom in deciding how to use them. Unfortunately, some states misused the funds for unrelated development projects. A notable case involved Karnataka trying to redirect ₹400 crore from its pollution control board, leading to scrutiny from the National Green Tribunal (NGT). Such actions prompted the NGT to step in, indicating that this wasn’t an isolated issue.
On January 15, a new set of rules was introduced through the Environment (Protection) Fund Rules, 2026. Now, 25% of penalty funds will be sent to the Centre, while 75% will remain with the state. All payments should go through a specific online portal, ensuring transparency and proper accounting. This is part of a broader effort to establish clear guidelines for how these funds can be used.
Additionally, both the states and the Centre must set up project management units to oversee fund distribution and ensure transactions are properly audited. This system is meant to improve accountability and prevent misuse of environmental funds.
Data from recent studies suggests that proper management of these funds could significantly boost environmental projects across the country. An expert in environmental policy noted, “These measures will help ensure that the penalties levied actually contribute to environmental protection, rather than being lost in bureaucratic red tape.”
In summary, the new regulations aim to keep control over environmental funds while promoting responsible use. This could lead to improved environmental conditions in the long run, a necessity as air and water pollution levels continue to rise.
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