NATIONAL RESOURCE ACCOUNTING IN INDIA: PROGRESS SO FAR

[Mr. M. GOVINDARAJAN]

Natural Resource

The concept of Natural Resource refers to all types of environmental assets existing in the environment and incorporates the broad set of services provided by ecosystems assets. Natural resource is essential for economic growth, employment, and, ultimately, prosperity of a country. 

Types of Natural Resources

Natural resources can be classified on the -

• Basis of origin –

• biotic; and
•  abiotic;

• Basis of their stage of development –

• potential resources;
• actual resources;
• reserve resources;
• stock resources.

• Basis of renewable resources or non renewable resources.

Natural Resource Accounting

The  Natural Resources Accounting (‘NRA’ for short) is an accounting system that deals with stocks and stock changes of natural assets, comprising biota (produced or wild), subsoil assets (proved reserves), water and land with their aquatic and terrestrial ecosystems.  It is a process of estimating the value of natural resource depletion and environment degradation due to economic activities.

The terms 'NRA', 'green accounting' and 'environmental accounting' are used interchangeably.

NRA aims to provide a framework for organizing information on the status, use, and value of natural resources and environmental assets as well as expenditures on environmental protection and resource management. Natural resource accounts differ from other data as they are organized in terms of stocks and flows.

Need for NRA

The need for natural accounting took its first step at the UN Conference on Human Environment in 1970 when the relationship between economic development and environmental degradation was discussed.  The need for NRA can be classified in the following categories-

• Resource management;
• Policy planning;
• Identification and accounting the natural resources within the economy;
• Monitoring sustainable development goals;
• Combating climate change; and
• Aid to Environment Impact Assessments.

NRA in India

In India, NRA is still in developing stage.  The Central Statistical Organization (CSO) has been spearheading the work and since the year 2000, more than 150 studies have been conducted.   CSO has issued supplement on Environment Accounts in September 2018 wherein the physical stock of four natural resources across India have been enumerated. Subsequently, CSO has also brought out the EnviStats 2019 based on the quality characteristics namely soil nutrient index and water quality accounts.

NRA is being dealt upon in GASAB for quite some time but it gained momentum

in recent years.  An internal working group was formed in 2018 with members from CAG, Ministry of Environment, Forest and Climate Change (MoEFCC), Ministry of Statistics and Program Implementation (MoSPI) etc to discuss the issues and challenges in implementing NRA in India and also to prepare a Concept Paper on the matter.  The first draft of the paper was prepared between August and December 2019 and released in January 2020.   The draft paper envisaged implementation of NRA in phases and proposed for taking up the Asset Accounts in respect of mineral and energy resources in the first phase, pilot studies on the above are being carried out in three States namely Andhra Pradesh, Uttar Pradesh and Rajasthan.

With the passage of time and undeterred exploitation of natural resources, the world including India has understood the criticality of the need for sustainability of natural resources. The Indian government has made a firm commitment to environmental protection as part of its development agenda, with a focus on the interconnections between poverty and environmental degradation that may be informed by ecosystem accounts.

Progress so far in India

The first initiative on NRA in India was taken in 1990s when a technical working group on NRA was constituted. As per the recommendations of the group, a pilot project on NRA was initiated in Goa in 1999-2000.  CSO commissioned the following eight studies-

• NRA on Air and Water pollution in Andhra Pradesh and Himachal Pradesh;
• NRA of Land and Forest for Madhya Pradesh and Himachal Pradesh;
• Environmental Accounting of Land and Forest of Meghalaya;
• NRA of Solid Waste, air pollution, water pollution, forests in Goa;
• Environmental Accounting of Land Water in Tamil Nadu;
• NRA for Air and Water Sectors in West Bengal;
• Accounting for unsustainable mineral extraction in Madhya Pradesh and West Bengal;
• NRA of Land and Forestry (excluding mining) in Karanataka.

An expert group was constituted on 04.08.2011 by the Prime Minister of India to develop a framework for ‘Green National Accounts in India’.    The group submitted its Report in March 2013 on 'Green National Accounts in India - framework'.   The report proposed to evaluate the comprehensive notion of wealth or the social value of an economy's stock of capital assets, comprising-

• reproductible capital (commonly known as manufactured  capital : roads, ports, cables, buildings, machinery, equipment, and so forth),
• human capital (population size and composition, education, health), and
• natural capital (ecosystems, land, sub-soil resources and so on).

The report is on greening the national accounts. Much attention was given to discuss ways to measure the value of environmental resources by offering a unified view of conservation and pollution.  The report recommended the following six short, medium and long term goals for the said purpose-

1. Initial focus on preparation of physical supply use tables in respect of land, forest and timber and minerals which is possible in a short time period.
2. A medium term plan for preparation of-

• monetary supply use tables for land, forest and timber and minerals; and
• physical supply use tables for soil, water, carbon and energy.

3. A medium term plan for estimating NDP by adjusting the depletion of natural capital that have been identified by the steps at 1 and 2 above.
4. To initiate exploratory research on valuation and development of a more complete set of national accounts.
5. A long-term plan for-

• environmental accounts in respect of aquatic resources, air and biodiversity; and
• institutionalising mechanism for periodic collection of data/periodic studies and surveys.

6. The Planning Commission (now NITI Aayog) could fruitfully put in place a mechanism for estimating shadow prices and their natural ranges.

EnviStats India – 2018

In order to make gradual progression towards the compilation of accounts, the EnviStats (Environment Statistics) initiates the presentation of aggregate environment accounts for India with the asset accounts in physical terms of minerals, water, land and forest.

EnviStats India – 2019

EnviStats India – 2019 has two volumes.  The I Volume contains six chapters each of which focuses on one of the six fundamental components of Framework for the Development of Environment Statistics (FDES) –

• Chapter 1 - FDES Component 1 : Environmental conditions and quality;
• Chapter 2 - FDES Component 2 : Environment resources and their uses;
• Chapter 3 - FDES Component 3 : Residuals;
• Chapter 4 - FDES Component 4 : Extreme events and disasters;
• Chapter 5 - FDES Component 5 : Human Settlements and Environment health;
• Chapter 6 - FDES Component 6 : Environment protection, management and regulation.

EnviStats - 2019 Volume II envisages adding condition layers to the physical accounts based on the quality characteristics namely, soil nutrient index and water quality accounts in respect of surface, ground and sea water.

Natural Capital accounting

India is taking part in an innovative multi-year project to advance the theory and practice of ecosystem accounting. It joins four other countries - Brazil, China, Mexico, and South Africa - as part of the Natural Capital Accounting and Valuation of Ecosystem Services (NCAVES) project.   The project’s main objective in the partner countries is to mainstream natural capital accounting and valuation of ecosystem services in data-driven decision and policymaking and is expected to influence policy-makers at the national, regional and local level. Project activities in India include the development of pilot ecosystem accounts, which will include experiments at different scales with different types of accounts:

• At the national level, several ecosystem services will be modelled in physical and monetary terms, including nature-based recreation and crops provisioning service. Also, the feasibility of compiling a biodiversity accounts will be examined.
• At the national level soil accounts (an important element of ecosystem condition) will be developed applying the S-World model.
• In the State of Karnataka, a whole suite of ecosystem accounts will be developed in physical and monetary terms. These accounts will also be applied in scenario analysis.

India will also contribute to other work streams of the project such as the testing of indicators that are derived through the accounts, and the work stream on alignment with sustainability reporting in the private sector.

Concept paper

Comptroller and Auditor General of India (C&AG) constituted Government Accounting Standards Advisory Board (‘GASAB’ for short) for the union and the States under Article 150 of the Constitution of India to formulate Government Accounting Standards in addition to other pronouncements and Guidance Notes, through a notification dated 12th August, 2002.

A Concept Paper on NRA in India was released by the GASAB in July 2020.  This paper prepared by GASAB covers in detail what are natural resources, what is NRA, valuation of resources, progress so far in India with regard to NRA, role of NRA in SDG and the initiatives in other countries, issues and challenges in NRA, participation of private sector in NRA, way forward for implementation of NRA in India, etc. It also provides detailed guidance about preparation of asset accounts in respect of various natural resources such as mineral, energy, water, forestry, wildlife, land along with disclosure on receipts and expenditure related to NRA.

Status of action plan

The concept paper envisaged short term goals, medium term goals and long term goals. 

Short term goals

The short term goals (from 2019 – 2020 to 2020 – 2022) are for-

• Preparation of asset accounts on mineral and energy resources in States;
• Initiation and preparation of disclosure statement on revenues and expenditure related to NRA.

The following are the challenges-

• Mandating the reporting requirements by private sector as to use of resources, water and release of effluents/residuals.
• Identifying the authority to manage and monitor online information from private sector.

Medium term goals

The medium term goals cover the period from 2022 – 23 to 2024-2025.  The medium term goals are for-

• Preparation of National Asset Accounts on mineral and energy resources;
• Preparation of Asset Accounts in respect of other three resources namely, water, land and forest resources in the States.
• Preparation of supply and use tables in physical and monetary terms showing flow of natural resource inputs, products and residuals.

The following are the challenges-

• Periodicity of the Asset Accounts of Water, Land and Forest resources to be decided;
• Mapping the periodicity of data management with the requirement of Asset Accounts;
• Decision on the agency which would prepare the Asset Accounts in respect of the resources at national level.

Long term goals

The long term goals cover the period from 2025 – 2026 onwards.  The long term goals are for-

• Preparation of the economic accounts highlighting depletion adjusted economic aggregates; and
• Preparation of functional accounts recording transactions and other information about economic activities undertaken for environmental purposes.

Implementation of NRA in India

The following are the stages in implementation of NRA in India-

• Preparation of Asset Accounts;
• Supply and use tables in physical and monetary terms;
• Sequence of economic accounts highlighting depletion of resources;
• Functional accounts – recording economic activities for environmental purposes;
• Resolution of issues and challenges  listed in short, medium and long term goals along the process of implementation.

Issues and challenges

Issues and challenges which will have to be mandatorily dealt with for effective implementation of NRA in India as envisaged in the short, mid and long term plans.  The following are the issues and challenges in implementing NRA-

• Continued preparation of Asset Accounts;
• Limitations in preparing the asset accounts – mapping the periodicity of data;
• Validation of data;
• Multiple agencies in data collection in respect of water resources issues of data sharing/data conflict/classified data.

The following are the indirect hindrances to the effectiveness of data base and other records related to NRA-

• Unregulated extraction of underground water;
• Unscrupulous mining companies/agencies;
• Untapped resources;
• Not all sources are economically exploitable;
• Land Laws in the country.

Conclusion

India is yet to commence any form of annual environmental accounting of its resources. Thus, any progress towards preparation of NRA would hinge upon the idea of continuous generation of reports, at prescribed intervals.  The flexibility in designing the environmental accounts as per the need of the respective country, implementation has been planned in a phased manner in respect of nonrenewable resources to start with and thereafter rolled out to cover the renewable resources.

References:

1. Concept Paper on Natural Resource Accounting in India – an initiative of Government Accounting Standards Advisory Board - Released on July 2020 by Government Accounting Standards Advisory Board.
2. www.gasab.gov.in.