Relevance: GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Key Phrases: Government Accounting Standards Advisory Board, Natural Resource Accounting, Environmental protection, Resource management, Environmental accounting, Sustainable development goals, UN General Assembly, Green National Accounts in India, EnviStats.

Why in News?

• The Government Accounting Standards Advisory Board (GASAB) has come up with a Natural Resource Accounting (NRA) for tracking and maintaining the natural resources of India.
• GASAB had prepared templates for the asset accounts for mineral and energy resources which were field-tested and reviewed by the experts in the consultative committee.
• Currently all 28 States and one Union territory (J&K) have prepared the asset accounts for 2020-2021. The asset accounts captured details of
  • 34 major minerals,
  • 58 minor minerals and
  • all four fossil fuels.
• A report of the asset accounts will be shortly published and an electronic dashboard with information will be hosted in the web.

About Government Accounting Standards Advisory Board (GASAB)

• In 2002 Comptroller and Auditor General of India (C&AG) constituted Government Accounting Standards Advisory Board (GASAB) under Article 150 of the Constitution of India with the support of Government of India.
• The decision to set-up GASAB was taken in the backdrop of the new priorities emerging in the Public Finance Management and to keep pace with International trends.
• The new priorities focus on good governance, fiscal prudence, efficiency & transparency in public spending.
• GASAB, as a nodal advisory body in India, is taking similar action to formulate and improve standards of government accounting and financial reporting and enhance accountability mechanisms.

Responsibilities of the Board:

• To establish and improve standards of governmental accounting and financial reporting in order to enhance accountability mechanisms;
• To formulate and propose standards that improve the usefulness of financial reports based on the needs of the financial report users;
• To keep the standards current and reflect changes in the governmental environment;
• To provide guidance on implementation of standards;
• To consider significant areas of accounting and financial reporting that can be improved through the standard setting process; and
• To improve the common understanding of the nature and purpose of information contained in financial reports.

Natural Resource Accounting:

• Natural resource accounting 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.
• It is frequently used in the sense of physical accounting as distinguished from monetary (environmental) accounting.
• NRA aims to provide a framework for organising information on the status, use, and value of natural resources and environmental assets as well as expenditures on environmental protection and resource management.
• Asset accounts is the first stage of NRA with the final third stage being environmental accounting.

Need for Natural Resource Accounting:

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-

• Interrelation between economy and environment:
  • It helps to organising 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 accounting inter-alia refers to the inter connection and linkages in the economy and our environment or surrounding.
• Policy planning:
  • Sound database to help policy makers to understand the potential impact of their decisions.
• Monitoring sustainable development goals:
  • NRA has deep linkages with the Sustainable Development Goals (SDGs) as four out of the 17 goals directly relate to management of natural resources and their accounting.
  • India is a signatory to the September 2016 UN General Assembly Resolution—“Transforming the World, the 2030 agenda for Sustainable Development” which requires the preparation of Natural Resource Accounts(NRA).
• Combating climate change:
  • Asset and flow accounts have been recognised as a useful framework for monitoring, measuring and analysing climate change.
• Socio economic development:
  • Several of these accounts are closely related to the social and economic attributes, making them a useful tool for the Policy.

Natural Resource Accounting in India

• The first initiative on NRA in India was taken in 1990s when a technical working group Natural Resource Accounting on NRA was constituted. As per the recommendations of the group, a pilot project on NRA was initiated in Goa in 1999-2000.
• An expert group was constituted on in 2011 to develop a framework for ‘Green National Accounts in India’.
• The group submitted its Report in 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-
  • Reproducible capital (commonly known as manufactured capital: roads, ports, cables, buildings, machinery, equipment, and so forth).
  • Human capital (population size and composition, education, health).
  • Natural capital (ecosystems, land, sub-soil resources and so on).
• In way to progress further, the EnviStats (Environment Statistics) initiated in 2018 for presentation of aggregate environment accounts for India with the asset accounts in physical terms of minerals, water, land and forest.
• The Ministry of Statistics and Programme Implementation (MoSPI) has taken up several initiatives under the project Natural Capital Accounting and Valuation of the Ecosystem Services (NCAVES) which aims to advance the theory and practice of ecosystem accounting in India.
• States in India that are adopting NRA includes -
  • West Bengal for the sector of water and air
  • Tamil Nadu- Environmental accounting of land and mining resources
  • Natural resource accounting in Goa
  • Natural resource accounting in Karnataka

Proposal of Government Accounting Standards Advisory Board (GASAB):

• A Concept Paper on NRA in India was released by the GASAB in July 2020. GASAB has suggested a well laid out implementation plan divided into three term goals in consonance with the strategy envisaged by the System of Environmental Economic Accounting - Central Framework (SEEA-CF).

Way Forward:

• India being a tropical country is home to more than 45000 species of plants and trees. For a sustainable forest management, it is important to cherish our forest reserves and charge private sector for our diverse natural capital and avoid exploitation of resources of our forest resources.
• Opting for NRA in India, that too based upon State forest reserves will not only help India to estimate it’s GDP more accurately but will also help to further blow down the recent impact of covid-19 on national income. It will help to build a true picture of our national income and growth.

Source: The Hindu BL

Mains Question:

Q. Efficient ‘Natural Resource Accounting’ is an urgent need of the hour. Discuss the efforts being made by India in this direction.