Centre Sets Rules for Using Funds Collected from Environmental Law Penalties

75% of penalties will go to the State or UT Consolidated Fund, while the Centre is to retain the remaining 25%.

Despite assurances given by the state government that no new mines will be opened in Hasdeo, the recent tree-felling has led to an intensified tribal struggle to hold onto their lands. 

(Altered by Vibhushita Singh/The Quint)

The Ministry of Environment, Forest and Climate Change has notified new rules under the Environment Protection Act, 1986, specifying procedures for the use of funds collected through penalties imposed for violations under the EPA, the Air Act, 1981, and the Water Act, 1974.

The Environmental (Protection) Fund Rules, 2026, outline activities eligible for funding, including environmental monitoring, remediation, and administrative expenses. The rules also define the process for allocation and oversight of these funds.

According to The Indian Express, the Environmental (Protection) Fund will support up to 11 specified activities. These include installation, operation, and maintenance of environmental monitoring equipment, capacity building through laboratory set-ups, and remediation of environmental damage at contaminated sites.

The rules also allow for administrative expenses, capped at five percent of the fund’s annual amount with the Centre or state government.

Allocation of funds is structured so that 75 percent of the penalties collected are remitted to the Consolidated Fund of the State or Union Territory concerned, while 25 percent is retained by the Centre as outlined in the notification.

The funds are first credited to the Consolidated Fund of India and then transferred to the Public Account of India, ensuring a clear financial trail.

Other permitted uses of the fund include conducting studies as directed by courts and tribunals, and any other purpose deemed necessary by the Centre for environmental protection and betterment as per the rules.

The Union Minister for Environment, Forest and Climate Change is designated as the “competent authority” for approving such uses.

“The administrator shall remit 75 percent of the penalty collected in the Fund to the Consolidated Fund of the State of the concerned state and the Union Territory, and 25 percent of the penalty shall be retained by the Centre,” the Rules stated.

Audit and oversight mechanisms are also specified, with the Comptroller and Auditor General of India responsible for auditing the fund’s accounts. Audit reports will be tabled in Parliament and state legislatures as coverage revealed, ensuring transparency and accountability in the use of environmental penalty funds.

The creation of the Environmental (Protection) Fund was enabled by the Jan Vishwas Act, 2023, which decriminalised several pollution-related offences and set penalty ranges from Rs10,000 to Rs15 lakh as details emerged.

Note: This article is produced using AI-assisted tools and is based on publicly available information. It has been reviewed by The Quint's editorial team before publishing.