On 15-1-2026, the Ministry of Environment, Forest and Climate change notified the Environmental (Protection) Fund Rules, 2026, introducing a unified national mechanism for collecting, allocating, and utilizing environmental penalties for measurable and accountable environmental protection activities.
Key points:
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These Rules have been framed under Sections 6 and 25 of the Environment (Protection) Act, 1986.
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Rule 2 explains the relevant terms essential for the interpretation of these Rules.
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Under these Rules, the Environmental Protection Fund is created in the Public Account of India to ensure that environmental penalties are used exclusively for environmental restoration, monitoring, and improvement activities.
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These Rules outline the purposes for which the Environmental Protection Fund and how it will be utilised, ensuring transparent, accountable, and need-based environmental protection activities.
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The Fund will be used for:
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Environmental monitoring equipment
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Environmental laboratories
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Research related to clean technologies
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Assessment and remediation of environmental damage
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Capacity building and strengthening of regulatory institutions such as:
○ SEIAA
○ SEAC
○ CPCB
○ SPCBs
○ Pollution Control Committees
○ Commission for Air Quality Management
○ Urban Local Bodies
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Development of IT enabled systems and related equipment
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Studies directed by Courts and Tribunals
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Awareness generation projects, including through eco clubs
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Demonstration projects involving innovative environmental technologies
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Measures for prevention, control, and mitigation of environmental pollution
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Administrative expenses (up to 5% of available funds)
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The Fund will not be used for:
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Payment of medical expenses
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Foreign visits
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Construction of office buildings or residences
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Purchase of furniture, office equipment, vehicles, ACs, generators, etc. for government offices
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The following amounts will be credited into Environmental Protection Fund:
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Penalties imposed under:
○ Air (Prevention and Control of Pollution) Act, 1981
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Incomes under Section 16(2) of the Environment Protection Act.
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Rule 5 outlines the manner in which the funds will be credited:
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The amount credited will be deposited online via the Bharatkosh portal.
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All payments made through Bharatkosh will be first credited to the Consolidated Fund of India (‘CFI’).
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Credited amount will be transferred to the Public Account of India under the Environmental Protection Fund (‘EPF’) in accordance with prescribed accounting procedures.
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Distribution between Centre and States:
○ 75% of the collected penalty is remitted by the Administrator to the Consolidated Fund of the respective State/Union Territory.
○ 25% is retained by the Central Government.
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Each State/UT, upon receiving its share, must credit the amount into a dedicated Reserve Fund within the Public Account of the State/UT.
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The Reserve Fund can be utilized for purposes specified under Rule 3 and Section 16 of the Act.
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Under Rule 6, the Fund will be administered through dedicated Project Management Units (‘PMUs’) established by the Centre and each State/UT, headed by a Joint Secretary or State Secretary.
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All payments will be submitted and States/UTs will be required to annually report total funds received, utilized, and remaining balances.
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Rule 8 clarifies that the Fund will be audited by the Comptroller and Auditor General (‘CAG’).
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The Central Pollution Control Board (‘CPCB’) will develop and maintain a dedicated online portal that will serve as the exclusive interface for all authorities and stakeholders involved in implementing these Rules once it becomes operational.