By Nita Bhalla

NEW DELHI, Aug 16 (Reuters) - India's drive to attract investments in mining in resource-rich forests could upset the fragile ecological balance of the country, environmentalists said.

Forests, which cover around 20 percent of the country, are rich in biodiversity, but there is also an abundance of coal and minerals such as bauxite, iron ore, nickel and manganese under the forest floors. Environmentalists are now concerned that the government will meet rising demands for land by big firms which are promising millions of dollars of investment and potential employment for the country's poor masses.

"The amount of forest land which has been diverted for mining has increased significantly in recent years," said Chandra Bhushan of the Centre for Science and Environment, a New Delhi-based think-tank.

"As the economy has grown, so has industrial development in these areas and there is now huge pressure on forest land."

Bhushan said 61,000 hectares (150,700 acres) of prime forest land was converted for mining between 1998 to 2005, compared to 35,000 hectares (86,490 acres) from 1980 to 1997 -- almost double the area in less than half the previous period.

India has over 63 million hectares (155 million acres) of forest land, ranging from Himalayan temperate to dry zone forests.

According to conservation body WWF-India, these forests are home to more than 45,000 species of flora and 81,000 species of fauna of which thousands are endemic.

GREEN PANEL AT RISK?

But mining companies are now vying for areas in the eastern states of Orissa, Jharkhand and Chhattisgarh, which are not only abundant in minerals and biodiversity, but also accommodate millions of tribal people whose livelihoods depend on forests.

Despite sound legislation to protect forests, activists said India's aim to maintain high economic growth at between 8 to 10 percent annually has led to forest clearance procedures often being overlooked in favour of development.

Authorities now want to abolish a decade-old conservation panel which advises the Supreme Court on the environmental impact of development projects.

Activists said the panel, known as the Centrally Empowered Committee (CEC), has in recent years prevented or delayed many industrial projects in environmentally sensitive areas, a move which authorities see as hampering their development agenda.

The CEC delayed plans by Vedanta Resources Plc <VED.L> to mine in Orissa's lushly forested Niyamgiri hills, saying authorities violated their own guidelines by allowing the firm to build a refinery without getting clearance to mine there.

"The CEC is delaying projects often without any reason and these are decisions which should be made by the government," said an official at the Environment Ministry.

"The government will put in place measures which will continue to protect the forests but at the same time respect the environment," said the official, who did not want to be named.

But environmentalists are sceptical.

"If they get rid of the CEC, forest lands will be easily diverted for projects like mining and the country's ecological security will be threatened," said Kanchi Kohli of Kalpavriksh, an environmental campaign group.

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