Normal Central Assistance and Additional Central Assistance (ACA) are devolved by the Planning Commission to assist the State Governments in specific areas. The present paper details an incentive mechanism for preventing deforestation and promoting conservation of forest ecosystems. A number of options to provide support to the states with vast tracts of forest cover above national average (NA) are discussed. A recommendation to consider excess dense forest cover above NA and devolving funds (Rs 10,000/ha) for management is recommended after discussions with experts. The suggestion could form the basis for an ACA package to the states to enable protection of forests.