Environmental Protection Fund Rules, 2026

The Government of India has notified the Environmental (Protection) Fund Rules, 2026 under the Environment (Protection) Act, 1986, marking a major step towards strengthening restorative environmental governance in the country. These rules institutionalise a dedicated fund for environmental protection, remediation, and capacity building, using penalties collected from environmental violations.

The move ensures that financial penalties imposed on polluters are directly channelled into improving environmental quality, transparency, and regulatory effectiveness.

What are the Environmental (Protection) Fund Rules, 2026?

The Rules establish a statutory Environmental Protection Fund to be used exclusively for activities that restore, protect, and improve the environment. The fund is financed through penalties collected under three major environmental laws:

• Environment (Protection) Act, 1986

• Air (Prevention and Control of Pollution) Act, 1981

• Water (Prevention and Control of Pollution) Act, 1974

Penalties range from ₹10,000 to ₹15 lakh, depending on the nature and severity of violations.

Key Features of Environmental (Protection) Fund Rules, 2026

1. Source of the Fund

The Fund is created from penalties imposed for environmental violations under the three core pollution control laws. This ensures a “polluter pays” principle, where offenders financially contribute to environmental restoration.

2. Purpose and Scope of Utilisation

The Rules identify 11 eligible activities, with a focus on restorative environmental governance, including:

• Strengthening environmental monitoring infrastructure

• Remediation of polluted sites

• Restoration of degraded ecosystems

• Laboratory infrastructure development

• Institutional and technical capacity building

• Court- or tribunal-mandated environmental studies

• Research and scientific assessments

• Pollution abatement and mitigation measures

This ensures the Fund directly contributes to tangible environmental outcomes.

3. Administrative Expenditure Cap

Administrative costs, including:

• Salaries of Project Management Unit staff

• Consultancy and management expenses

are capped at 5% of the annual Fund.
This guarantees that at least 95% of resources are utilised for environmental protection and remediation work.

4. Competent Authority

The Union Minister for Environment, Forest and Climate Change is designated as the Competent Authority. The Minister is empowered to:

• Approve fund utilisation for listed activities

• Sanction additional activities deemed environmentally necessary

This ensures flexibility and swift decision-making.

5. Fund Flow and Accounting Mechanism

The Rules ensure constitutional and financial transparency:

1. Penalties are first credited to the Consolidated Fund of India (CFI)

2. Thereafter, the amount is transferred to the Public Account of India (PAI)

3. Funds are then utilised strictly for environmental purposes

This mechanism maintains proper legislative and financial accountability.

6. Centre–State Sharing Formula

To promote decentralised environmental governance:

• 75% of collected penalties → transferred to the concerned State/UT

• 25% retained by the Centre

This allows states to undertake location-specific remediation, where environmental damage actually occurs.

7. Audit and Legislative Oversight

• The Fund will be audited by the Comptroller and Auditor General of India (CAG)

• Audit reports will be tabled in:

  • Parliament

  • State Legislatures

This ensures transparency, accountability, and democratic oversight.

Significance of the Environmental Protection Fund Rules, 2026

The new rules will:

• Strengthen environmental compliance

• Promote the “polluter pays” principle

• Ensure penalties lead to real environmental restoration

• Enhance Centre–State cooperation in pollution control

• Improve institutional and scientific capacity

• Increase transparency in environmental governance

• Support sustainable development goals

Conclusion

The Environmental (Protection) Fund Rules, 2026 represent a paradigm shift from punitive enforcement to restorative environmental governance. By linking penalties directly to environmental remediation, capacity building, and monitoring infrastructure, the government has created a sustainable and transparent financing mechanism for environmental protection. This framework will significantly strengthen India’s fight against pollution and ecological degradation.

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