Nepal’s Community Forest User Groups (CFUGs)

Executive Summary 

Nepal’s Community Forest User Groups (CFUGs) constitute the world’s largest experiment in community based natural resource governance. Established through the 1993 Forest Act, these legally autonomous bodies empower local communities to manage, protect, and profit from designated national forests. As of 2024, 23,682 CFUGs manage approximately 24,902 square kilometres of forest, covering 37.7 percent of the nation’s total forest area, encompassing 3.19 million households and roughly 14 million people. The programme has helped nearly double forest cover from 26 to over 45 percent since the early 1990s, delivered a 37 percent reduction in deforestation and 4.3 percent reduction in poverty in managed areas, and positioned Nepal to earn up to 75 million US dollars from REDD+ carbon finance by 2026. CFUGs invest roughly 45 percent of their total expenditure on public services and infrastructure including schools, drinking water systems, roads, and rural electrification. Yet the social contract is contested: governance gaps, caste-based exclusion, biodiversity blind spots, and the unsettled politics of federalism reveal an eco-social contract under active negotiation. 

Context and Background 

Social, Economic and Political Context 

Nepal is a landlocked, low-income country of approximately 29.6 million people. Despite decades of development, 38 percent of households still depend on public forests for firewood, fodder, and leaf litter, with the poorest households most reliant on these common pool resources. The country’s 2015 Constitution formally committed to social justice after a decade long civil conflict, establishing rights to a clean environment (Article 30), equitable resource distribution (Article 51), and proportional representation of women, Dalits, Indigenous Peoples, and Madhesi communities. https://www.unrisd.org/en/library/blog-posts/towards-an-eco-social-contract-in-nepalhttps://www.unrisd.org/en/library/blog-posts/towards-an-eco-social-contract-in-nepal The Hindu caste system continues to structure power within community institutions. The introduction of historically privileged ‘high’ caste group Khas Arya as a new inclusion category in the Constitution diluted commitments to historically discriminated groups, while Indigenous activists criticize community forestry for overriding customary land management practices and excluding local Indigenous communities from equitable resource sharing. The question of who benefits from forest governance is thus inseparable from Nepal’s broader struggles over caste, ethnicity, and social justice. 

Historical Background 

In 1979, a World Bank report predicted that Nepal’s hill forests would be largely gone by 1990. Historically, the government’s efforts to counter the situation have evolved across three phases. In 1978, Panchayat Forest Rules first permitted local oversight of designated forests. From 1976 onward, the Nepal Australia Forestry Project (NAFP), described as Australia’s longest running aid investment, supported reforestation and community forest group development in the middle hills. The decisive breakthrough came with the 1993 Forest Act, which granted CFUGs autonomous,  self-governing legal status with participation in constitution making, hold elections, set harvesting rules, impose fines, and retain all revenues. What began as a crisis response became the largest devolution of forest management authority in the developing world. 

Objectives and Scope

The programme’s objectives are to reverse deforestation by transferring forest management rights to local communities, generate sustainable livelihoods through regulated harvesting of timber, firewood, fodder, medicinal herbs, and non-timber forest products (NTFPs), build local democratic institutions inclusive of women, Dalits, and Indigenous Peoples, and contribute to climate mitigation through enhanced carbon sequestration. This is a macro-scale programme operating across all 77 districts. The 23,682 CFUGs collectively govern roughly one third of the nation’s total forest area, involving half the rural population. The temporal scope stretches from the 1978 Panchayat Forest Rules through the present day. 

Stakeholder Analysis

The primary governance bodies are the CFUGs themselves: democratically elected committees that write operational plans, manage harvesting, collect revenues, and determine benefit distribution. The Federation of Community Forestry Users Nepal (FECOFUN_), established in 1995, serves as the national umbrella body organizing 22,415 federated CFUGs and contributing to national forest policy formulation. The Department of Forests provides regulatory oversight and approves operational plans. WWF Nepal has conducted governance assessments. The World Bank and LEAF Coalition provide carbon finance. Indigenous Peoples’ organizations, particularly NEFIN, contest aspects of the model that they argue exclude Indigenous communities from decision making, while Dalit rights movements continue to challenge caste-based barriers within CFUG governance structures. 

Description of the Eco-Social Contract 

Substantive Content 

The eco-social contract visible in this programme operates through clear reciprocal logic. The state says: this forest is yours to manage. The community says: we will protect it, regenerate it, and govern ourselves around it. Each CFUG operates under an approved operational plan specifying harvesting limits, species restrictions, regeneration targets, revenue distribution, and governance procedures. In return, communities gain exclusive rights to timber, firewood, fodder, and NTFPs. The 2009 Community Forestry Guidelines strengthened inclusion by mandating 50 percent women on executive committees and directing 35 percent of income toward pro poor interventions. From a macroeconomic perspective, the model validates Elinor Ostrom’s Nobel Prize winning framework for governing the commons: clear boundaries, locally tailored rules, and graduated sanctions. 

What makes this contract tangible is how CFUGs translate forest revenues into community development. A FECOFUN case study of Bungdal CFUG, one of Nepal’s earliest user groups registered in 1995, documents how a single 78-hectare community forest funds rural electrification, drinking water management, school improvements, road maintenance, and women’s enterprise support. At the national scale, research shows CFUGs spend 45.2 percent of total expenditure on public services and infrastructure and that this income increases local development resources by approximately 25 percent, with funds flowing into schools, roads, water reservoirs, and revolving loan funds. In 2008, CFUGs spent 53 percent of their revenue on community development including scholarships for poor children, health emergencies, and microbusiness support. As one CFUG chairperson told CIFOR researchers: “Out of the total revenue, we invest 25 to 30 percent in conservation related activities. We also invest in education, roads, health posts and biogas.” 

Implementation and Resources 

Community forests store approximately 21 percent of Nepal’s total forest carbon, with the national stock estimated at 1,159 million metric tons. The REDD+ programme in 13 Terai districts reduced 18 million tonnes of carbon emissions between 2018 and 2024. Nepal is set to receive 10 million US dollars in the first phase from the World Bank (80 percent earmarked for community managers), a second phase (2022-2024) expected to generate 15 million US dollars, and a LEAF Coalition agreement targeting 50 million US dollars. Revenue sources include timber and NTFP sales, membership fees, fines, and increasingly carbon credits and payments for ecosystem services

Outcome and Impact Analysis 

Success Indicators and remaining challenges 

The environmental transformation through thisis globally significant. NASA Landsat analysis confirmed that community forestry directly drove forest regrowth, with one community forest in Kabhre Palanchok growing from 12 percent canopy cover in 1988 to 92 percent by 2016. The Nature Sustainability study (Oldekop et al., 2019), analysing over 18,000 community forests, found managed areas 51 percent more likely to achieve simultaneous reductions in deforestation and poverty. Research in community managed Sal forests measured above ground carbon density of 165 tonnes per hectare, demonstrating consistent carbon accumulation under community stewardship. 

Socially, the programme functions as a decentralised safety net. 66 percent of Nepali households collect non timber forest products, with women as the primary collectors. More than 20,000 women led CFUGs are restoring degraded lands, adopting agroforestry, and preparing climate smart operational plans. Women in the Chisapani Community Forest harvest lemongrass, palmarosa, and citronella for essential oil production, generating independent income streams. Over 1,072 CFUGs operate with all women committees. Yet a 2025 study across four districts found persistent gender disparities, with men more likely to view themselves as managers and women as users. Research also reveals an overall bias against poor and Dalit households in access to CFUG funded infrastructure, though poor members have higher likelihood of obtaining pro poor micro loans. 

Lessons Learned and Innovations 

Three critical tensions define the programme’s frontier. First, WWF governance assessments identified corruption and elite capture as persistent barriers. Second, a timber paradox: forests could sustainably produce 4.5 million cubic feet annually, but actual extraction is 0.5 million because government royalties make legal timber uncompetitive. Third, while tree cover surged, biodiversity gains remain limited because many reforested areas are pine monocultures that block sunlight, prevent undergrowth, and paradoxically intensify human wildlife conflict. A 2025 UC Press study raises a further concern: voluntary participation in community forestry is declining as livelihood diversification and out migration weaken incentives for forest stewardship, threatening the programme’s long term institutional viability. 

Conclusion 

Recommendations 

Reform timber royalty structures so that community harvested wood becomes economically competitive.  REDD+ revenues should be channeled directly to CFUGs bypassing central bureaucratic layers. Biodiversity considerations need to beembedded in operational plans through mandatory wildlife management and partnerships between the Department of Forests and Department of National Parks.  

At the same time, community forestry governance must move beyond numerical quotas toward substantive decision-making power for women, Dalits, and Indigenous Peoples, in line with Free Prior and Informed Consent (FPIC) principles under ILO Convention 169 which Nepal has ratified but not yet implemented. Finally.  declining participation should be addressed through institutional reforms that align community forestry incentives with the changing socioeconomic realities of rural Nepal. 

Future Directions 

Nepal’s adoption of federalism is distributing forest authority across federal, provincial, and local tiers, creating both opportunity and jurisdictional risk. Carbon finance could replace declining timber revenues. The March 2026 general election introduced new political dynamics, with manifesto commitments to decentralized budgeting and constitutional amendments addressing demands from marginalized communities. Whether Nepal’s eco-social contract evolves into a genuinely inclusive instrument of ecological and social justice, or calcifies around existing power structures, will depend on the sustained contestation of the civil society movements, Indigenous organisations, and women led forest groups that made the contract possible in the first place.