Green National Accounting System in India: Challenges and Solutions

Green National Accounting System in India: Conceptual Issues and Measurement Problems S. Suresh Kumar Member, Indian Statistical Service Government of India New Delhi 1

Introduction India s population is growing at an annual growth rate of 1.9%. Size of population - 0.33 Billion (1951 Census) Increased to 1.21 Billion (2011). Annual GDP growth rate 3.5 - 4% - in the pre-liberalization period (Hindu Growth Rate ) 7.3% during 2003-2010 and 6.3% in 2011-12. Liberalization of Indian Economy (1991 onwards) More development demands more land use changes like deforestation, conversion of agricultural land into non-agricultural use etc. About 52% of the population is depends on agriculture as small farmers and agricultural laborers. 2

Introduction Poverty is the worst polluter Late Mrs. Indira Gandhi, in 1972 in the world conference on Human development A host of legislations had been followed the Stockholm conference Created Central Pollution Control Board (CPCB) in 1974 Annual Compendium of Environment Statistics since 1997 in line Framework for the Development of Environment Statistics (FDES) by UNSD 8 studies on NRA for selected sectors during the period 2002-2008 (Mining, Air, Water, Land, and Forest). Constituted a Technical Advisory Committee in 2010 to monitor the Synthesis project . Report submitted in 2012 3

Introduction Conflict between local communities who depend on natural resources for their livelihood and government policies Dr. Jairam Ramesh, the then Hon ble Minister of State for Environment and Forest felt that India needs Green National Accounts (GNA) that can influence the policy decisions of the government with respect to environment and its protection. He observed in one of his speeches that If you can t measure something, you can t monitor it and manage it . Constituted an Expert Group under the chairmanship of Sir. Partha Dasgupta, Professor-Emeritus, Cambridge University, UK under the administrative control of Ministry of Statistics & Programme Implementation. Central Statistics Office (CSO) comes under this Ministry. 4

An Overview of Existing Accounting Systems (System of National Accounts - SNA) A framework for the formulation of a set of accounting procedures that the national governments use to compile routinely to track the activities of their economies. A powerful tool to calculate major economic indicators like Gross Domestic Product (GDP), Gross National Product (GNP), saving rates, trade balance etc. First published in 1953 and latest in the series is the SNA 2008. The basic idea was to supply a reliable database to assess the impact of public policy on the economy. Environmental concerns do not appear to have been adequately addressed in the SNA primarily on account of the fact that environmental activities fall outside the domain of the conventional definition of economic activity. 5

An Overview of Existing Accounting Systems (System of Environmental-Economic Accounting - SEEA) United Nations Statistical Commission (UNSC) established an informal group of statisticians, called London Group on Resource Accounting in 1993. The objective:- to evolve the best practice in theory and practice of environmental accounting confining to the framework of SNA and to supply a forum for sharing national and international developments in environmental accounting. Broadened the conventional and rather rigid definition of assets adopted and followed under the SNA and developed an alternative system of national accounting incorporating all natural resource assets like land, soil, water, air etc., which form part of the environmental functions like waste absorption, ecological functions like habitat, flood and climate control, other non-economic amenities like wild biota, subsoil assets, land, water, air etc. 6

An Overview of Existing Accounting Systems (System of Environmental-Economic Accounting - SEEA) Developed as a Satellite Accounting System of SNA The Handbook of National Accounting: Integrated Environmental and Economic Accounting (SEEA) published in 2003, has evolved certain monetary evaluation techniques to value the non-market functions of the natural resources. The environmental assets identified by the SEEA are (a) natural resources; (b) mineral and energy resources; (c) soil resources; (d) water resources; (e) biological resources; (f) land and associated surface water; and (g) ecosystems. These categories were useful to assess the impact on sustainability of natural resources and development. As the economic development and growth gather momentum, it should ensure ecological welfare by maintaining key environmental functions. 7

An Overview of Existing Accounting Systems (System of Environmental-Economic Accounting - SEEA) In 2012, the SEEA Central Framework (SEEA CF) adopted as an international statistical standard for environmental economic accounting. Multipurpose conceptual framework for understanding the interactions between the economy and the environment, and for describing stocks and changes in stocks of environmental assets, built on agreed concepts, definitions, classifications, and accounting rules. Significant change between the SEEA-2003 and SEEA CF in terms of the treatment of environmental economic activities. The SEEA CF recognizes only two economic activities as environmental: environmental protection and resource management The structure and details of discussion on measurement of environmental assets has been streamlined in a number of areas in SEEA CF when compared to SEEA-2003. Discussion on the application of the Net Present Value approach to the valuation of natural resources and the associated choice of discount rate has been developed. 8

Interim Report of the Expert Group On Green National Accounts Framework concludes that the objective of economic evaluation should be a comprehensive notion of wealth. Wealth means the social value of an economy s entire stock of capital assets. To estimate wealth, an economy s productive base to be listed: Reproducible capital (roads, buildings, ports, machinery, equipment) or manufactured capital . Market prices are typically used to measure investments in reproducible capital. Human capital: People themselves are assets to nations. Population (Size and demographic profile): Education: Education involves costs and should be seen as investment in people. Total benefits of education are the sum of private and external benefits. Health: Good health enhances a person s well-being and enhances productivity. Natural capital (local ecosystems, biomes, sub-soil resources) 9

SEEA SNA Proposed Methodology 10

Major Challenges Economic & Political Large geographical area - 4 geographical regions (Mountainous region, Plains, Desert areas, Southern peninsular), - 4 climatic zones (Alpine Zone, Sub- tropical, Tropical, and Arid) with high degree of biodiversity. Wood content of forest varies as per types of vegetation Segregation of data According to region-wise Conflict on the ownership of resources (forest dwellers vs. non-forest dwellers, upper riparian vs. lower riparian) 11

Major Challenges Data Related (existing) Different organizations having different mandates involved in data collection. Varying levels of specialization and technical capabilities. specific purposes with specific set of indictors at specific time intervals. data dissemination policies may vary from organizations to organizations 12

Major Challenges A Solution to this Problem Establishing correlation between the existing databases of heterogeneous entity and linking them together and building up a database for the use of national accounting purposes Mechanisms need to be developed for the dissemination of necessary data on agreed principles 13

Major Challenges Future Data Requirements Sustainability Can be defined as Final Stock Consumption + Conservation + Augmentation >= Initial Stock Selection of Indicators Existing system supports the methodology based on the System of National Accounts (SNA). Human welfare indicators are qualitative in nature and falls beyond the ambit of a market economy. The environmental services are a complex set of interactions between the biotic and abiotic elements. 14

Major Challenges What are the specific indicators for which estimations / predictions are required and how will it be integrated with the overall system? Existing Land-Use data not sufficient Depletion of Land / Forest quality Water Supply and Demand Analysis Water use according to Industry, urban, rural & Agriculture Total demand Quantification of Water resources Both surface and Ground water Augmentation of water resources - Oil, Natural Gas & Mineral resources Quantification of resources Rate of extraction 15

Major Challenges Measurement issues Efforts should be made to identify data gaps at country level and address it Data on some indicators are already available. They are to be organized in time series manner Studies may be conducted to work out ratios Some of the indicators may be interpolated and extrapolated with base year value 16

Issues in focus Implementation plan Data augmentation The govt agencies producing all relevant data needs to be identified. Standardization of concepts and definitions, guidelines for the data collection and methods are to be formulated. Capacity augmentation in terms of training and creation of manpower. Establishment of new institutions and refurbishment of the existing ones. Collaborative mechanisms need to be initiated within the country and with international agencies. Establishment of a mechanism for national level coordination. 17

Thank You For Your Kind Attention E-Mail: sureshkumarji@gmail.com 18