According to the Comptroller and Auditor General of India ( CAG), as against the required compensatory afforestation for 8,160.46 hectares in 2006-12, only 2,789.51 hectares were covered during this period.
This has led to a shortfall of 66 percent, said the CAG in a report on the state's Compensatory Afforestation Fund Management and Planning Authority ( CAMPA).
Compensatory afforestation is must for using forestland for non-forest reasons.
It also picked holes in the state's monitoring mechanism that results in under-utilisation of CAMPA.
"Against total available funds of Rs.188.38 crore in 2009-13, the state CAMPA could utilise Rs.127.09 crore only."
The CAG said in 142 cases of diversion of forest land from October 2002 to April 2008, the forest department did not realise the net present value of Rs.25.85 crore.
Forest department estimates say over 9,000 hectares of forest land has so far been diverted to non-forest use. Of this, 7,000 hectares were used for hydel projects.
According to a 2009 report by the Forest Survey of India, the hill state with an area of 55,673 sq km is left with only 14,668 sq km (26.35 percent) of forest cover.