The new guidelines for Panel Compensatory Afforestation (PCA) proposed by the Ministry of Environment, Forest and Climate Change seek to bring more clarity on how penalties are imposed for diversion or misuse of forest land for non-forest use without prior approval. For the ecologically fragile Northeast region, the proposed guidelines present a mixed bag of reforms and concerns. The Forest Advisory Committee (FAC) of the Ministry recommended that violation of the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 1980, occurs when forest land is permitted for de-reservation, non-forest use, lease, or tree felling for clearing the forest without the prior approval of the Central Government. This clarity has become more relevant for the Northeast region as infrastructure projects such as highways, railways, hydropower projects, power transmission lines, mineral extraction, and development of border areas involve diversion and clearing of forest. The new guidelines, with their deterrent provisions, serve as checks and balances against indiscriminate and unauthorised forest clearing for project execution in the region. The introduction of the penal Net Present Value (NPV), which is estimated and paid in money by considering the ecological services of the forest, such as clean air, water, carbon sequestration and climate control, and imposed on the user agency to recover the loss of these services, is viewed as an effective and reformative deterrent. However, in the absence of clear rules, there was no uniformity in penalty imposition by Regional Empowered Committees, and this inconsistency in penal NPV imposition needed to be removed. The penal NPV is considered an effective deterrent against diversion of forest without approval, as compensatory afforestation always cannot compensate for the loss of complex biodiversity in ecologically sensitive regions like the Northeast. Nevertheless, continuation of both compensatory afforestation and penal NPV may create confusion and pose hurdles in reforms in forest governance. The FAC recommended that in addition to penal provisions provided in the Van (Sanrakshan Evam Samvardhan) Rules, 2023, the violators must plant trees on an equal area of land to make up for the loss resulting from illegal and unauthorised forest diversion. It further recommended that such compensatory planting must be carried out on the same type of land where normal compensatory afforestation is done – implying that if regular afforestation is allowed on non-forest land, the penal tree planting also must take place on non-forest land. The FAC, however, clarified that no penalties shall be levied in cases where the violation is not attributable to the user agency. While this provision protects the user agency from unfair punishment, transparency demands that it must be established beyond any doubt as to who is responsible for the illegal diversion of forest. Another key recommendation proposed by the FCA requires the state government to submit a detailed report, in case of any violation, clearly mentioning the nature of offences and the persons responsible for allowing the offence, including action taken with all relevant details, to the Ministry along with the diversion proposal. This provision, however, leaves room for manipulation by powerful user agency to influence state government officials or forest staff to either refrain from submission of a report or submit a diluted report. Institutionalisation of a strong monitoring and oversight mechanism is necessary to ensure that reforms aimed at preventing unfair punishment to user agency are not misused to escape accountability against actual violation of forest act provisions. The FCA’s clarification that if forest land is used for non-forest purposes without prior approval of the state governments, then it is not to be treated as a violation of the 1980 Forest Act and instead treated as encroachment under the Forest Act 1927 or respective state Forest Acts provides more teeth to the state governments to act decisively against forest encroachers. This provision justifies and strengthens the decision of the Assam government to act against encroachers of forest land to protect ecologically sensitive areas from illegal occupation, more particularly by immigrant settlers. While the new guidelines are aimed at simplifying the penalty imposed to increase compliance with forest rules, there are critical gaps when it comes to the northeast region. Forest governance is much more complex than the rest of the country, with sharing of power and governance under the provisions of the Sixth Schedule and complex land laws in the region. Besides, the biodiversity of the region is intricately linked with the way of life of the various indigenous communities inhabiting forest fringe areas, and the conservation of the ecological richness of these forests is critical to the sustainability of life and livelihoods. Without integrating the quantum of ecological losses, estimating the actual loss due to forest diversion in the region cannot be realistic and comprehensive. Involvement of communities to prevent forest law violation and estimation of ecological losses can help remove these gaps. The complexities in administrative and forest governance in the region notwithstanding, implementation of the new guidelines is crucial to safeguard forests from rampant diversion.