Rules 6 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rules 6 to 9 deal with the running of the Environmental Protection Fund: a dedicated Project Management Unit, the annual statement of accounts and annual report, audit by the Comptroller and Auditor-General of India, internal audit, and an online portal to be built by the Central Pollution Control Board. Three forms go with them: Form I for payments, Form II for accounts and Form III for the annual report.
These rules are current as amended up to their notification on 15 January 2026 (G.S.R. 35(E)); no amendment found to 3 October 2026, and later amendments and notifications should be checked. If your organisation is a recipient of Fund money or a payer of penalties and needs a record system, see our compliance advisory service.
A Project Management Unit, headed by an officer not below Joint Secretary (Centre) or Secretary (State), runs the Fund (rule 6). It prepares the annual statement of accounts (Form II) and annual report (Form III) (rules 6 and 7). The Comptroller and Auditor-General audits the Fund and the audited accounts are laid before Parliament or the State Legislature (rule 8). Payments to the Fund go with Form I (rule 6(7)); a CPCB portal will become the exclusive interface (rule 9).
Rule 6: the Project Management Unit
The Fund "shall be monitored by a dedicated Project Management Unit" created by the Central Government and by each State Government or Union territory Administration, as the case may be. The sub-rules set its shape:
| Sub-rule | Provision |
|---|---|
| 6(1) | A dedicated Project Management Unit is created for monitoring |
| 6(2) | Headed by an officer not below the rank of Joint Secretary to the Government of India, or Secretary to the State Government in a State or Union territory Administration |
| 6(3) | Maintains detailed accounts of disbursal of the Fund |
| 6(4) | Maintains proper record of receipts |
| 6(5) | Comprises legal and financial consultants who assist the department dealing with environment issues in all incidental and ancillary matters for smooth administration |
| 6(6) | Prepares the annual statement of accounts (Form II(a) for the Centre, Form II(b) for a State or Union territory) and the annual report (Form III) and submits them to the Administrator |
| 6(7) | All payments to the Fund are submitted along with Form I to the Administrator |
| 6(8) | At the end of every financial year, each State or Union territory submits details of total funds received, utilisation and balances in its own funds, as Form II(b) and Form III |
The "Administrator" is the Ministry of Environment, Forest and Climate Change or a body notified by the Central Government, as rule 2 defines it. The Project Management Unit is the working arm; the department dealing with environment issues is the owner of the decisions.
Rule 7: statement of accounts and annual report
Rule 7 has three sub-rules.
- 7(1): the annual statement of accounts, in Form II(a) for the Centre and Form II(b) for a State or Union territory, is finalised by the Administrator for the Centre and by the concerned department of the State Government or Union territory Administration for the State.
- 7(2): the Central Government finalises its annual report in Form III "giving a full account of its activities defined under this act for each financial year", and it "shall be laid before each House of Parliament along with audit report given by the Comptroller and Auditor-General of India". For a State Government or Union territory Administration, the same process is replicated and the reports are laid before the respective State Legislatures.
- 7(3): the State Government prepares its annual report in Form III in relation to the Fund, again giving a full account of its activities for each financial year.
The accounts are as on 31 March of the year.
Rule 8: audit
Rule 8(1) says the accounts of the Fund are audited by the Comptroller and Auditor-General of India "at such intervals as may be specified by him", and the audited accounts and report are laid in Parliament or the State Legislature, as the case may be.
Rule 8(2) gives the Administrator (for the Central Government) and the concerned department of a State Government or Union territory Administration the power to conduct internal audit at regular intervals.
Rule 9: online portal
The Central Pollution Control Board shall develop and maintain an online portal for implementation of the rules, "which shall be an exclusive interface between different authorities and stakeholders under these rules, once it becomes operational". The rule makes the portal the exclusive interface only once it is operational, so until then the rules operate through the forms and processes they describe. This article does not describe portal steps because the rules do not.
The three forms, by heading
Form I: format for making payments to the Fund. It captures the identity and addresses of the party and a list of acceptable proofs of identity, followed by the reason for payment: the date of the order, the Act and rule under which the order was passed, the adjudicating officer's name and designation, the State where the penalty was imposed, and details of the non-compliance (the adjudicating officer's order, others, additional penalty if any). It then records payment details such as total due, financial year, account heads, mode of payment and bank reference. Copies go to the Administrator, the concerned adjudicating officer, the State Board or Pollution Control Committee and the CPCB.
Form II(a) and II(b): annual statement of accounts. Form II(a) is for the Central Government and Form II(b) for each State or Union territory. Form II(a) shows the opening balance, additions (penalties under the EP, Air and Water Acts, split between Centre and State or Union territory), disbursal to States and Union territories, utilisation under heads that follow rule 3, and the closing balance. Form II(b) shows the State's opening balance, allocations from the Centre by Act, utilisation under the same heads and the closing balance.
Form III: annual report. A table of activity, amount sanctioned, amount spent, saving or excess expenditure, implementing agency and reasons for shortfall or savings, for the activities in rule 3 during the previous financial year.
Practical points
- For payers: attach Form I to the payment and keep the acknowledgement; the form asks for the order details, so keep the adjudicating officer's order at hand.
- For State departments: a calendar for the year-end filing of Form II(b) and Form III helps; the forms are prepared as on 31 March.
- For implementing agencies: Form III asks for reasons for shortfall or savings against each sanctioned amount, so keep activity-wise records.
- For Boards: copies of Form I are addressed to the State Board or Pollution Control Committee, so expect to see payment records.
Example
A State environment department receives its seventy-five per cent share of penalties and credits it to the reserve fund. The Project Management Unit, headed by the Secretary, uses it to upgrade a district laboratory and install monitoring stations. At the end of the year it prepares Form II(b) showing the opening balance, the Centre's allocation by Act and the utilisation, and Form III showing, for each activity, the amount sanctioned, the amount spent and the reasons for any saving. The accounts are audited by the Comptroller and Auditor-General and the reports are laid before the State Legislature.
Need help with Fund reporting?
Whether you pay into the Fund or manage money from it, records have to line up with the forms. Our compliance advisory team can help you set up payment records, activity-wise registers and year-end formats.
Key takeaways
- A dedicated Project Management Unit monitors the Fund, headed by an officer not below Joint Secretary or Secretary.
- Form I accompanies each payment; Form II(a) and II(b) report accounts; Form III reports activities.
- Reports and audited accounts are laid before Parliament or the State Legislature.
- The Comptroller and Auditor-General audits the Fund; the Administrator or State department can conduct internal audit.
- The CPCB portal becomes the exclusive interface once operational.
Read next
- Rules 1-5: what is credited and how it is used
- Rules 5-8 of the EP Inquiry and Penalty Rules, 2024: penalty factors, extension and order
- Sections 15E to 16B of the EP Act: the Environmental Protection Fund
- Sections 15C and 15D of the EP Act: adjudicating officer, inquiry and appeal
Disclaimer: Based on the environment rules, guidelines and notifications named above as published in the Gazette of India, read with every amendment notified up to 3 October 2026 that the article names (consolidated reading texts from the CPCB 2021 compilation and the Goa State Pollution Control Board 2025 compilation were checked against the amending notifications), as consulted on 3 October 2026. Later amendments, CPCB guidelines, State Board orders and fees should be checked. This article is general information, not legal advice; check the official text before acting.