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The establishment of a commercial association in Palampur is significant in the Indian context, wherein most of the natural resource services for urban population are affected greatly by the action or inaction of their rural counterparts. Initially, many villagers were unfamiliar with the PES model and suspected payment for watershed services meant sale of forest and loss of community right over the forest. The first-ever payment for ecosystem services (PES) agreement in India between the Village Forest Development Society (VFDS) and the PMC has made this possible. Under the PWGI, PMC and VFDS, formed primarily from the Mahila Mandal, entered into an agreement on October 16, 2010. As per this 20-year agreement, PMC will pay Rs 10,000 annually1 to VFDS as PES for the protection and management of Bheerni forest. Apart from the PMC, FD and VFDS, other stakeholders in the PWGI were the Irrigation and Public Health Department (IPH), Bandla Gram Panchayat and GIZ. The president of the VFDS, Anu Devi, narrates that members of the Mahila Mandal also had to tolerate heated arguments from the village men. All members except the ward member are, interestingly, women. It was registered on October 1, 2010, under the Himachal Pradesh Societies Act 2006. Its executive committee comprises 11 members elected from the three villages (four from Odi, three each from Bohal and Mandai, and one ward member of the Gram Panchayat).
IPH made a commitment to design a separate drinking water system from the regular water supply and was closely associated with the entire process, while members of the Gram Panchayat sensitised the people and supported the formation of the VFDS. In return, the VFDS agreed to protect and conserve the catchment area of the Bohal spring (see: Highlights of the 20-year forest management plan). VFDS to select and appoint ‘rakha’ (guard) for forest protection. PES has been able to address the issues of forest conservation and management, livelihood generation for local communities, resource conflict between rural and urban stakeholders and climate change adaptation. The PWGI is a unique example of PES in India, where the receiver of an ecosystem service pays the community for the protection and conservation of a spring recharge area. The primary interest for the local community to engage with the PMC through the Palampur Water Governance Initiative (PWGI), however, was the possibility of establishing an institution that would give them the legal authority to manage and protect their forest.

As gravity supply from Bohal meant no pumping cost, and a consequent comparative cost advantage, and good quality water even during the monsoon meant low filtration cost in comparison with other sources of water, it was in the interest of the PMC to ensure regeneration of the Bohal source. While the state is largely dependent on streams and springs for its drinking water, many of its urban areas have become water-stressed on account of over-extraction from mountain streams. Bohal spring is the oldest and purest source of drinking water. Fine on grazing, theft of leaf and grass fodder, fuel wood and damage to the Bohal spring recharge zone. Every room of this resort is panelled with wood to give a complete feel of being an original chalet of the West. The forest is close to habitations and the local community uses it for grazing and fuel wood through the year, seasonally collecting fodder (leaf and grass).

The community comprises 60 households in Mandai, Bohal and Odi, with a population of 273 of the nomadic Gaddi caste. Palampur,, Himachal Pradesh, Kangra, Dharamshala, Hotels in Palampur on water availability threatens food security as well as causes the dieback of natural ecosystems, including species that sustain the livelihoods of rural households. The average annual rainfall in Palampur has dropped from 2,800 millimetres in 1940 to 2,100 mm in 2010. Water discharge in springs and streams has declined over the past few decades owing to climate change in the Himalayan region as well as land-use changes, such as degradation of forests and mismanagement in upstream catchment areas. However, a gradual reduction in the spring discharge meant that the supply was insufficient to meet the growing demand. However, water availability has been dwindling and the total water discharge from these sources over the past few decades has reduced substantially from 7-8 litre per second to about 3-4 litre per second.
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