The new law will help regulate a Rs 40,000 crore-plus corpus, built over the years to plant trees.
Eight years after it was introduced, the Rajya Sabha has passed the Compensatory Afforestation Management and Planning Authority bill, better known as CAMPA.
The new law will help regulate a Rs 40,000 crore-plus corpus, built over the years to plant trees where forest land has been used for developmental purposes.
The money will be disbursed to state governments according to the current value of the forest area diverted for development.
The bill, though, has given rise to concerns on whether it could accelerate destruction of rich, biodiverse forests in the name of development.
Congress lawmaker Jairam Ramesh, who first tried to bring it in in 2008, said the bill fails to "empower communities".
"It transfers money to states when it is actually meant for compensatory forestation and other purpose. There's no explicit provision for the forest rights act in this bill," he added.
AV Swamy, a member of the upper house of parliament from Odisha -- a state that will now get Rs 5,940 crore under CAMPA - said: "Tribals demand alternate structure, transfer of CAMPA money to gram sabhas. This should serve as a warning to this government."
A 2013 CAG report had exposed the corruption and blatant misuse of CAMPA funds.
Citing the example of Karnataka's past efforts at afforestation, CPM's CP Narayanan said, "Afforestation doesn't mean just planting of trees. The Bhadra eco-system in karnataka has been annihilated by the planting of non-native trees."
The government has assured the House that the rights of tribals and gram sabhas will be taken care of when rules are framed.
Some of the funds due to states under CAMPA are Rs 3,861 crore to Chhattisgarh, Rs 1,100 for Gujarat, Rs 2,435 crore for Maharashtra, Rs 3,099 crore to Jharkhand among others.
In his reply to the Rajya Sabha, Union Environment Minister Anil Madhav Dave said the government has always followed the involvement of gram sabhas and traditional forest dwellers.
"Gram sabhas, traditional forest dwellers will be included in the discussions on how the one from CAMPA should he used. We will make such a provisions in the rules once the law is made. If it is still found inadequate, we will review it in a year or so," he said.