Union govt ends vacuum, clarifies on use of environment funds

Bengaluru: The Union government has come up with a new set of rules for the utilisation of penalty collected under environmental laws, with a clear direction to deposit 25% of the funds to the Centre.

Pollution control authorities at the state and union territories collect penalties imposed under Air (Prevention and Control of Pollution) Act, 1981, Water (Prevention and Control of Pollution) Act, Environment (Protection) Act, 1986 and other instruments. Till now, these organisations had managed the funds at the state level without the Centre’s directions.

However, over the years, state governments have tried to tap into the funds.

With Karnataka’s latest attempt to divert Rs 400 crore of funds from the state pollution control board leading to the registration of a suo motu case at the principal bench of the National Green Tribunal (NGT).

The NGT pointed to the DH report indicating the attempted use of funds for development works in other states and which ordered notice to all the states and the Centre on December 3, 2025.

Centre’s new rules

In a notification, dated January 15, the Ministry of Environment, Forest and Climate Change has brought into force the Environment (Protection) Fund Rules, 2026, which seeks to clarify not only the purposes for which the funds have to be used but introduce guidelines for collection and crediting of funds. A new portal is set to be created for the implementation of the new rules.

Accordingly, all the payments related to penalty and other funds have to be made in the Environment Protection Fund (EPF) through the online Bharatkosh portal of the Centre by crediting into the consolidated fund of India. Thereafter, the funds are transferred to the public account of India under the EPF as per the approved accounting
procedure.

“The Administrator shall remit 75% of the penalty collected in the Fund to the Consolidated Fund of the State of the concerned state and the Union Territory, and 25% of the penalty shall be retained by the Centre,” the notification says.

Moreover, states and the Centre have to create a respective project management unit headed by not below the rank of joint secretary to manage the funds. The transactions will be reviewed and audited.