Environmental Accounting:

A General Overview and Indian Perspective

Social Statistics Division

Central Statistics Office
Ministry of Statistics & Programme Implementation
New Delhi

Introduction

The System of National Accounts (SNA) is 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. It is a powerful tool to calculate major economic indicators like
Gross Domestic Product (GDP), Gross National product (GNP), saving rates, trade balance etc.
In 1968, the United Nations (UN) had brought out the SNA for the first time. It identified various
economic activities taking place in the economic space of each of the country and based them on
the theories and models of economic growth. The revised SNA-1993 is elaborate in terms of its
coverage to include inflation, recognition of economic contribution of the service sectors,
financial institutions and the role of governments with respect to policy formulation in the
economic growth of the country. The latest in this series is the SNA-2008, which is revision of
the SNA-1993 and incorporates new areas emerged in the last decade and certain clarifications
on the issues discussed in the previous version.

The SNA 1993 incorporated the concept of satellite accounts, a major step in the
direction of flexibility. The satellite accounts are expected to continue to provide a useful way of
working towards solutions that give the appropriate level of confidence in challenging measures
such as environmental accounting issues. Using satellite accounts as a means of expanding the
relevance of the national accounts, but without affecting the compatibility of the central
framework used for economic policy making, has become an accepted means of developing and
testing new data sources and methods. Under the SNA 2008, it is possible in environmental

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accounting to record the relationships between natural resources and economic activities
differently by recording the depletion and the degradation of subsoil or other natural resources.

The report of the World Commission on Environment and Development, 1989, otherwise
called the Brundtland Report, had sensitized the issue of the ensuing scarcity of natural resources
and the serious degradation of the environment and this had resulted in the pronouncement of an
Integrated Environmental Economic Accounting System to be developed by the UN. In 1993,
the interim version of the ‘System of Integrated Environmental Accounting’ (SEEA) was
prepared and the revised version of the same in 2003. SEEA tries to cover 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. Some monetary evaluation
techniques have been suggested to value the non-market functions of the natural resources.

The objective of SNA is to provide the commonly used economic indicators of welfare
like GDP, GNP etc., which measure the value of the goods and services produced in the country
as well as the international trade. The inter-relationship between the environment and the
economy is viewed from an economic perspective only. On the other hand, SEEA tries to
segregate and elaborate all environmental related flows and stocks of assets, assessment of
deterioration of environment in terms of costs, linkages of physical resources accounting with
monetary accounting.

This paper attempts to discuss the initiatives undertaken by India in accounting the
environmental impact on economic growth and the steps taken for the implementation of the
concepts of SEEA. The discussion in the paper is organized in three sections. In the first section,
a brief history of the evolution and development of National Income Accounting followed in
India is discussed. In section two, SNA, SEEA and Natural Resource Accounting (NRA) are
discussed in relation to the procedures followed in the Indian context and the third section
focuses on the data gaps, followed by issues and conclusion.

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 Section – 1
Evolution and Development of National Income Accounting System in India

The independent India has a long history of bringing out the national income which dates
back from the period 1948-49. The first official estimates of national income for the period 1948-
49 to 1950-51 were released in 1956 which were conventional estimates based on the
methodology devised by the National Income Committee (NIC). The conventional series which
continued till 1966 had a conceptual foundation based on strong theoretical footing, however the
data availability and reliability were weak. A group of eminent statisticians and economists
under the leadership of P.C. Mahalanobis identified several gaps in the available statistics and
initiated a number of surveys to plug the gaps to the extent possible. The publication of SNA–
1968 by the United Nations gave a new direction to the research in this area.

The present system of National Accounts Statistics followed by India is in conformity

with the SNA-1993 and SNA-2008 to the extent data are available. It is a powerful tool for
comparing the national income of developing and developed countries alike. It takes into account
of the increasing complexities or changing economic activities of the economies and aim at
simplifying the work of economic accounts. It recognizes the wide range of conditions and
institutional arrangements that may be found in developing and developed countries and the
newly emerging market economies.

Until the liberalization of the Indian economy in the early 1990s, the growth of the GDP
was linked with the rise and fall in the primary sector. The Green revolution of the 1980s gave an
impetus in the performance of the economy in the positive direction. The liberalization and the
economic reforms in the country had brought major changes in the overall performance of the
economy and the share of agriculture and allied activities had steadily fallen down from 57
percent in 1950-51 to 18 percent in 2008-09. Manufacturing, Construction, Electricity, Gas,

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Water supply, Trade, Transport and financial services are the fastest growing areas in the Indian
Economy.

Table 1: Percentage Share of Gross Domestic Product in India at 1999-2000 Prices

Years Percentage Share of Gross Domestic Product (GDP) in India at 1999-2000 Prices
1950- 1960- 1970- 1980- 1990- 2000- 2005- 2006- 2007- 2008-
Sectors 51 61 71 81 91 01 06 07 08 09

Agriculture, 56.70 52.48 46.00 39.93 34.05 26.18 20.80 19.78 18.94 18.03
Forestry, Fishing,
Mining and
quarrying
Manufacturing, 13.66 17.09 20.41 22.03 23.24 23.51 25.27 26.06 26.26 25.61
Construction,
Electricity, Gas
and Water Supply
Trade, Hotels, 11.34 13.05 14.74 17.45 18.34 22.30 25.11 25.55 25.91 26.11
Transport &
Communication
Financing, 7.69 7.03 6.82 7.49 10.58 13.04 15.13 15.79 16.37 16.88
Insurance, Real
Estate and
Business Services
Public 10.61 10.35 12.03 13.10 13.78 14.98 13.70 12.82 12.52 13.37
Administration &
Defence and other
services
Source: Economic Survey 2009-10

Many of the sectors which are growing fast after economic reforms are energy intensive.
Industry, infrastructure and transport being the major forerunners of economic growth, their
impact on environment is high when compared to the traditional sectors. Over-exploitation of
natural resources, excessive use of various forms of energy and the resultant pollution to land, air
and water are the major concerns. The following table gives an idea on the growth of electricity
generation by sources in India since 1990.

Table 2: Growth of Installed Generating Capacity in India (in Megawatt)

As on Hydro Thermal Nuclear Renewable Total
Date Coal Gas Diesel Total Energy
Sources
31.03.90 18307 41236 2343 165 43764 1565 0 63636
(28.77) (64.80) (3.68) (0.26) (68.77) (2.46) (0.00) (100.00)
31.03.92 19194 44791 3095 168 48054 1785 32 69065
(27.79) (64.85) (4.48) (0.24) (69.58) (2.58) (0.05) (100.00)
31.03.97 21658 54154 6562 2947 61010 2225 902 85795
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 (25.24) (63.12) (7.65) (3.43) (71.11) (2.59) (1.05) (100.00)
31.03.02 26269 62131 11163 1135 74429 2720 1628 105046
(25.01) (59.15) (10.63) (1.08) (70.85) (2.59) (1.55) (100.00)
31.03.03 26767 63951 11633 1178 76762 2720 1628 107877
(24.81) (59.28) (10.78) (1.09) (71.16) (2.52) (1.51) (100.00)
31.03.04 29507 64957 11840 1172 77969 2720 2488 112684
(26.19) (57.65) (10.51) (1.04) (69.19) (2.41) (2.21) (100.00)
31.03.05 30942 67791 11910 1202 80903 2720 3811 118376
(26.14) (57.27) (10.06) (1.02) (68.34) (2.30) (3.22) (100.00)
31.03.07 34654 71121 13692 1202 86015 3900 7760 132329
(26.19) (53.75) (10.35) (0.91) (65.00) (2.95) (5.86) (100.00)
Source : Central Electricity Authority
(Figures in the bracket indicate percentages)

The total power generation has increased 19 times in 2006-07 as compared to 1989-90.
Coal is cheap and locally available natural resource for energy generation and 54 percent of
electricity is generated out of it. Even though, there has been a gradual reduction in the
percentage of electricity generated from coal, there is a gradual increase in the absolute use of
coal. In India, coal finds many uses from household to big industrial establishments as the major
source of energy. While SNA records the economic benefits derived out of the use of coal, it
fails to account for the impact of coal burning in the environment through pollution. As a non-
renewable natural resource, the volume change of coal due to its use does not appear in SNA,
unless monetary valuations are not applied to stock changes.

Section – 2
SNA, SEEA & NRA and Environmental Concerns

The SNA 1993 has three general kinds of accounts with distinguishing structural features,
viz., Current Accounts, Accumulation Accounts and Balance Sheets. Current Accounts deal with
production, income and use of income. The Balance Sheets present stock of assets and liabilities
and net worth. The Accumulation Account is a new term used to indicate that it covers more than
the capital and financial accounts of earlier versions of SNA. These features relate to the

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accounts that record the flows or stocks, the kind of entries made on the left and right sides, the
basis on which separate accounts are identified, and the kind and interrelationships of items that
bring the accounts into balance. However, elements in the SNA are those items which can be
assigned a value or which are directly or indirectly participating in the production processes and
accrue an economic value. The SNA does not address issues like environmental pollution,
watershed protection provided by forests, ecosystem services provided by environment etc.,
based on the fact that most of these services are beyond the purview of a market where
transactions are not recorded as an element having a market value. The deficiencies of SNA with
respect to the environment can be broadly classified into three:

(a) The depletion of natural resources is not accounted in the SNA: The SNA defines the
‘Economic Assets’ as those entities ‘over which ownership rights are enforced by institutional
units, individually or collectively’ and ‘for which economic benefits may be derived by their
owners by holding them or using them over a period of time’. SNA considers environment only
as an input in the production process and goods and services obtained from nature are scarce and
therefore have price. SNA defines ‘Natural Resources’ as ‘naturally occurring resources such as
land, water resources, uncultivated forests and deposits of minerals that have an economic
value’. It is again clarified that ‘those natural resources that are not capable of bringing
economic benefits to their owners are outside the scope of assets in the SNA’. The mineral and
energy resources that fall within SNA boundary are defined as the proven reserves. In the case of
water, the physical extent of surface water is only included in the natural resource category of the
asset classification.

The produced natural assets like value of livestock for breeding, orchards, private
plantations, timber tracts etc., are economic assets in SNA. The asset balances of produced assets
and non-produced natural assets include the opening and closing stocks of produced assets and
the elements explaining the change between net capital formation (holding gains or losses of
assets) and other changes in volume of produced assets and closing stocks. The gross capital
formation consists of gross fixed capital formation and the changes in inventories in produced
assets like buildings, roads, machinery, stocks of commodities etc. The gross fixed capital
formation may not include additions to the produced assets such as improvement of land, cost of
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transferring land and other non-produced assets between owners. The value of capital formation
is added to the value of non-produced assets, but separately ‘depreciated’ as other changes in
volume. So the non-produced assets do not figure in the calculation of National Domestic
Product (NDP), as all the changes in non-produced natural assets between opening and closing
stocks are explained in the SNA as holding gains or losses and other changes in volume of assets.

(b) Defensive expenditure taken as national product: Most of the national governments spend
a considerable amount of their resources to protect environment from damages arising from
development process. The pollution control measures adopted in India aims at installation of
pollution control equipments in the factories, bringing in rigid air pollution control policies and
their implementation like compelling the vehicle owners to install catalectic converters etc. The
government has many policies and public spending for the re-forestation and afforestation
activities such as Project Tiger, Project Elephant, Joint Forest Management and so on. The
medical expenditure for the victims of calamities, expenses on the rehabilitation of displaced
communities and the drinking water filtration are other examples. These expenditures are already
included in the income accounts along with all other intermediate or final consumption.

Table 3: Purpose classification of Expenditure of Administrative Departments

(At current prices, in Rs. Crores)
Purpose 2004-05 2007-08 2008-09
Current Capital Current Capital Current Capital
Exp. Exp. Exp. Exp. Exp. Exp.
Environmental 832 104 573 165 543 604
Protection
Relief on 2753 801 3684 -382 5295 2106
calamities &
other misc.
services

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Source: National Accounts Statistics, 2010, Central Statistics Office, New Delhi.

(c) Environmental quality and human development: The development goals like equity,
growth, employment, political stability are difficult to measure in monetary or physical terms,
notwithstanding the fact that these objectives hold the key to human welfare. The development
strategy should be multi-pronged in character and the long-term planning process should
consider the economic as well as the non-economic variables such as demography, environment
etc. to achieve the sustainable development. Following are examples of impact factors on
environment.

About 9,54,839 Hectare of forest land has been diverted for non-forest use till 2004 after
the enactment of the Enforcement of Forest Conservation Act, in 1980. (Forest & Wildlife
Statistics, India, 2004, MOEF). The growing urbanization and industrialization cause large scale
diversion of forest land and thereby the loss of bio-diversity and scarcity in water availability as
most of the major rivers in India are originating from forests and hills. Industrialization entails
conversion of forest land and the increase in the number of motor vehicles as conventional
indicators of economic growth. However, its impact on the health and general well being of the
people remains totally ignored.

As per the Central Pollution Control Board (CPCB) document, the Respirable Suspended
Particulate Matter (RSPM) levels in the cities like Ahmedabad, Kanpur, Sholapur, Lucknow,
Bangalore, Chennai, Hyderabad, Mumbai and Kolkata are alarming. The registration of new
vehicles in India is increasing at the rate of 10 percent per annum.

System of Integrated Environmental and Economic Accounting (SEEA)

The System of Integrated Environmental and Economic Accounting (SEEA) on the other
hand has been developed as satellite accounts allowing the accountants to violate some of the
conventions of the SNA in ways quite useful for environmental statistics, but without threatening
the consistency of the SNA framework. SEEA attempts to integrate different methodologies
proposed for environmental accounting into a single organized framework through the ‘building
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blocks’ beginning with physical accounts and dis-aggregation of data already included in the
SNA and working towards more complex data on the depletion and maintenance costs required
for the sustainable use of scarce resources.

SEEA, as a satellite account of SNA, comprises four categories of accounts.

(1) The first category considers pure physical data relating to flows of materials and
energy and marshals them as far as possible according to the supply and use and
input-output frameworks of the SNA. The accounts in this category also show how
flow data in physical and monetary terms can be combined to produce so-called
‘hybrid’ flow accounts.
(2) The second category of accounts takes those elements of the existing SNA which are
relevant to the good management of the environment and shows how the
environment-related transactions can be made more explicit. For this it is necessary
to go beyond the supply and use tables and look at the whole system of the SNA flow
accounts including income distribution and redistribution.
(3) The third category of accounts in the SEEA comprises accounts for environmental
assets measured in physical and monetary terms. Timber stock accounts showing
opening and closing timber balances and the related changes over the course of an
accounting period are an example.
(4) The final category of SEEA accounts considers how the existing SNA might be
adjusted to account for the impact of the economy on the environment. Three sorts of
adjustments are considered; those relating to depletion, those concerning so-called
defensive expenditures and those relating to degradation.

The SEEA framework proposes application of non-market valuation techniques and their
applicability in answering specific policy questions. It discusses calculation of macro-economic
aggregates adjusted for depletion and degradation costs and also advantages and disadvantages
of such aggregates.

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Linkages between SNA & SEEA

Environmental accounts aim to reflect within a framework based on the SNA the impacts
of using (and sometimes using up) natural resources and the generation of residuals that pollute
the air and water and also identify specific activities undertaken to prevent or combat the
environmental impacts of human activity. The satellite account developed by the SEEA is trying
to address the flaws in the SNA framework from a sustainable development perspective.

(a) Segregation and elaboration of Environment related flows and stocks: Environmental
protection expenditures are actual expenses incurred by industries, households, the government
and non-governmental organizations to avoid environment degradation or eliminate the effects
after degradation has taken place. These are included in SNA, but are usually not identified
separately in the conventional production and final use tables. These expenditures are called
defensive expenditures.

(b) Physical asset accounts and monetary environmental accounts: The physical assets accounts
cover the total stock or reserves of natural assets and the changes there-in, even if those assets
are not affected by the economic system. In SEEA, these accounts are recorded as monetary
assets and flows account.

(c) Environmental costs and benefits: SEEA expands and complements the SNA with regard to
costing, the use/depletion of natural resources in production and final demand, and the changes
in environmental quality, resulting from pollution and other impacts of production, consumption
and natural events on the one hand, and environmental protection and enhancement on the other.

(d) Accounting for capital/wealth: Unlike SNA, SEEA covers natural capital in addition to the
man-made capital. Natural capital include scarce renewable resources such as marine resources
or tropical forests, non-renewable resources of land, soil and subsoil assets (mineral deposits),
and cyclical resources of air and water. Capital formation is correspondingly changed into a
broader concept of capital accumulation.

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(e) Measurement of environmentally adjusted product and income: The consideration of the costs
of depletion of natural resources and changes in environmental quality allows the calculation of
modified macroeconomic aggregates in SEEA. Indicators thus compiled include, in particular, an
Environmentally adjusted net Domestic Product (EDP).

Cross-cutting issues

SNA and SEEA present the classification of assets in different perspectives. SNA starts
with land and continues with other natural resources that are input in the production process.
SEEA, on the other hand starts with natural resources as providing use benefits through the
provision of raw materials and energy used by the economy and are subject to quantitative
depletion through human activities. It follows with land and surface water, as providers of direct
and indirect use benefits (or may provide such benefits in the future) through the provision of
space for economic and non-economic human activities; and lastly, it includes ecosystems as
they provide indirect use benefits for humans in the form of a variety of services including
cleansing of fouled air, water, soil and protection against solar radiation, regulation of
geochemical flows and others.

(a) In SEEA, the environment is considered as the system of reference in the asset accounts
module, where as in SNA, the economy is considered as the system of reference. SNA only
recognizes environment as the input in the production process and some of the natural resources
are scarce and hence it commands a price.

(b) Soil is included under land in SNA, but SEEA accounts it as a separate item.

(c) SNA groups items according to whether they are produced as a result of a production process
or a natural process and according to whether they are used more than once in the production
process. It also involves different valuation. SEEA groups them according to the resources and

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further subdivides them on whether they are produced or non-produced. It takes the perspective
of the physical aspect.

Natural Resource Accounting – an overview

The terms ‘growth’ and ’development’ are two distinctively used nomenclatures in
economic parlance to represent the economic performance and the socio-economic structure of
the economy. The economic growth only refers to the rise in output in monetary and physical
terms. The economic development is a far more comprehensive term which captures the socio-
economic structure in terms of social welfare of the people like education, health, job
opportunities and the level of inclusion in the overall growth process of the economy.

SNA, as measure of growth, is a good quantifiable indicator and perhaps it cannot be

considered as a measure of overall development of the economy in terms of its environment,
citizens and sustainable use of natural resources to upkeep the present rate of growth. Ignoring
the contribution of non-market value of the environmental goods and natural resource depletion
will result in misrepresenting the social welfare in the long run.

SEEA, as satellite accounts, though aims at overcoming certain deficiencies of SNA, also
has problems such as exclusion of some resources for non-availability of data, market
imperfections leading to underestimation of resource cost, risk in applying contingent valuation
methods in communities having low literacy and environmental awareness, etc.

The Natural Resource Accounting (NRA) is an attempt to integrate the environmental

issues in the conventional national accounts, as it provides information on the stock of the natural
resources available in a country at a particular point of time and activities for which the resources
are being utilized. It includes both marketed and non-marketed goods and services generated by
the natural environment like the consumption benefits of amenities, waste disposal services and
the detrimental effects of pollution.

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 The focus of NRA is on the ‘management’ aspect of the environment rather than its
scorekeeping function and use of accounting as a means to assemble information in a logical
manner in order to support the operations of an entire economy. For management purposes, the
structure of accounts is more important than its implications on performance indices. NRA takes
into account the complete spectrum of variables, both economic and non-economic and
enumerates the natural environment as a whole. NRA, as a tool of integrated analysis, has several
potential applications to indicators of sustainability and the overall development of the country.

(a) NRA can be used to augment conventional economic indicators to improve their relevance to
the issue of sustainability.
(b) NRA framework is a convenient way to organize physical and economic accounts in a
manner that demonstrates the linkages between the environment and the economy.
(c) The inconsistencies in the costs and benefits of environmental policy can be settled by
providing detailed estimates of pollutant-by-pollutant or sector-by-sector costs and benefits of
regulation.

Human welfare is indirectly affected when the environment is used as an input to

production. Direct effects on human welfare might include changes in air quality, recreation,
aesthetic viewing opportunities and food gathering. Assessing the size of the stock of natural
environment becomes important as the changes in the existing stock might affect the future flow
of services from the environment and therefore affect the welfare potential of future generations.
NRA assumes paramount importance when the development becomes the main theme of the
economic planning process especially in developing economies as the resources are scarce or
their sustainable exploitation is yet to be worked out from a holistic perspective.

Indian Initiates in Natural Resource Accounting

Undoubtedly, human welfare is directly linked to environment and hence evolving a

system to develop accounting of all possible relations between environment and economy has
become a necessity. Assessing the size of the stock of the natural capital becomes important

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because the changes in the existing stock might affect the future flow of goods and services from
the environment and affect the welfare potential of the future generations. Keeping this in mind
and for assessing the future potential of the natural resources base, CSO had conducted eight
studies on NRA covering various sectors like air, water, land, soil, mineral and forest for selected
states, through reputed academic / research institutions, the details of which are as under.

Table 4: CSO Initiated Studies on NRA

[Link] Study Organisation
1 NRA of Air and Water Pollution in Andhra Institute of Economic Growth
Pradesh & Himachal Pradesh (IEG), Delhi
2 NRA of Land and Forestry for Madhya Pradesh Indian Institute of Forest
& Himachal Pradesh Management (IIFM), Bhopal
3 Environmental Accounting of Land and Forestry North East Hill University (NEHU),
of Meghalaya Shillong
4 NRA in Goa Integrated Research and Action for
Development (IREDe), Delhi
5 Environmental Accounting of Land and Water in Madras School of Economics
Tamil Nadu (MSE), Chennai
6 NRA for Air and Water Sectors in West Bengal Jadavpur University, Kolkata
7 Accounting for unsustainable mineral extraction The Energy Resources Institute
in Madhya Pradesh & West Bengal (TERI), Delhi
8 NRA for Land and Forestry (excluding mining) in Centre for Multi-Disciplinary
Karnataka Development Research (CMDR),
Dharwad, Karnataka

The studies have covered various aspects of environmental accounting as described

below:

(i) The first study was on physical and monetary accounting of natural resources for water
and air in the states of Andhra Pradesh and Himachal Pradesh with emphasis on the use of
appropriate market and non-market valuation methods in developing monetary accounts of
natural resources.

(ii) The second study aimed at identifying major environmental issues, generating physical
accounts of resource base, working out economic value of resource base and change in stock

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using appropriate valuation techniques and estimating cost of environmental degradation or
benefits of environmental upgradation in the states of Madhya Pradesh and Himachal Pradesh.

(iii) The third study, in Meghalaya, generated data pertaining to various components of land
and forest resources, identified goods and services rendered by these natural resources and their
annual output, worked out value of these resources in economic terms and identified ecologically
sensitive areas and various natural and anthropological threats to land and forest resources and
their impacts on these resources.

(iv) The fourth study was aimed at preparing physical and monetary accounts and examining
the report of NRA in Goa done under phase I of the project with a view to preparing Green SNP
for the state. The sectors that were covered were water pollution due to effluents from industries,
water pollution and solid waste generation from tourists, hotels and restaurants, municipal waste
and waste from households.

(v) The fifth study developed monetary accounts in Tamil Nadu wherever possible to
estimate the cost of degradation of water and land resources to the economy and to account for
the interaction between the economy and the environment.

(vi) The sixth study envisaged an assessment of the base line information / database available
for preparation of physical and economic accounting of natural resources in West Bengal.

(vii) The seventh study aimed at preparing detailed accounts consistent with SEEA
highlighting reasons for departure from SEEA wherever necessary.

(viii) The last study was on development and application of appropriate valuation techniques
for deriving monetary estimates of change in stock and flow of the sector generating adjusted
State Domestic Product (SDP).

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 The CSO also separately undertook a study on ‘Post Clearance Environment Impacts and
Cost Benefit Analysis on Power Generation in India’ though National Environmental
Engineering Research Institute (NEERI), Nagpur. For the case studies, thermal power projects at
Ramagundam (Andhra Pradesh), Durgapur (West Bengal) and Gujarat Electricity Board, gas-
based power project at Jhanor-Gandhar village in Gujarat and hydroelectric project at Koyna
(Maharashtra) were included. The objectives of the study were: (i) identification of direct and
indirect effects on social, economic and environmental aspects in respect of the power projects,
(ii) review of methodologies for quantification in physical terms and economic valuation of such
effects, (iii) development of suitable methodologies to collect data and assess the cost of effects
for use in environmental accounting, (iv) development of methodological framework for
valuation of benefits and environmental damages with specific reference to Natural Resources
Accounting, and (v) to suggest improvements to minimize the effects of degradation of
environment by power projects.

SEEA prescribes two valuation methods viz., maintenance cost method and non-market
valuation by stated and revealed preference methods. In fact, the projects undertaken by CSO
provided case studies using both these methods. The non-market valuation methods used were
hedonic prices method, household health production function method, travel cost method etc.
Also some of these studies attempted to make estimates of maintenance cost at the sector and
regional levels. The sectors covered were thermal power generation, urban transport, industrial
management, forests and land and exhaustible resource of coal.

The studies were intended to build up a sector-wise framework for NRA applicable to
India in view of the diversities of flora, fauna and the mineral resources. The enumeration of the
natural wealth becomes a primary requisite for a fast growing economy with high growth of
population and heavy dependence on natural resources for the economic growth to sustain. Now,
the efforts are on to build up a sector-wise NRA framework through a Technical Advisory
Committee under CSO involving the Institute, Centre for Economic & Social Studies,
Hyderabad, which is expected to be finalised in the near future.

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 Section - 3
Data-Gaps and availability

For achieving tangible results towards developing SEEA, most important step is to take
stock of the availability of data and to identify data gaps and the requisite new sets of data. In
this section, these issues are discussed.

The Environment (Protection) Act, 1986 imposes stringent conditions on the industries
and business firms for the implementation of pollution control measures. As a result, firms are
investing in plant and machinery for the pollution control equipments and recurring expenditure
on the day-to-day operation of the plants in terms of consumables and manpower. The
expenditure incurred by the firms is captured and shown in the input/expenditure side of the
accounts. A separate account for recording the pollution control expenditure is not kept by the
industries. Hence, data pertaining to pollution control activities undertaken by firms as a separate
entity are not maintained.

The Annual Survey of Industries (ASI) conducted by CSO captures the data on capital
stocks in plant and machinery, but the recurring expenditure in terms of manpower employed,
the inputs used and other running costs are not separately available at present. Though ASI is a
genuine source of information, it cannot be used as it is incomplete or insufficiently addressing
the data requirements.

Goods and services which form part of the domestic consumption like domestic
production of meat, fish captured from lakes, rivers and ponds, fuel wood collected from forest,
building materials collected for construction of houses, forest produces like honey, wax etc are
not accounted for in the National Accounts, as such goods and services do not get involved into
any economic transactions. The National Sample Survey Office’s consumer expenditure survey
partly addresses this issue, but all India figures covering all non-economic activities with respect
to items mentioned here are not available.

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 Forest cover is important in controlling soil erosion and flood control. The expenditure on
flood control and compensation to mitigate the after-effects of flood from the government
exchequer are accounted for in public finance whereas the value of the forest cover in its
physical terms is not.

The State of Forest Report (SRF, 2009) published by Forest Survey of India gives the
data on Forest Cover, Area above Tree Line, Forest Cover in different Forest Type Groups,
Change in Forest Cover, Status of Mangroove Cover, Tree Cover estimates, Growing Stock,
State-wise Forest and Tree Resources etc. The data on forest produce are also available.

Forestry Statistics India (FSI) 2007 published by Indian Council of Forestry Research &
Education (ICFRE) covers physical and financial data on afforestation of forest land, progress of
joint forest management, year-wise funds released and expenditure under India Eco-
Development Project, funds released under Project Tiger scheme, forest produce, export &
import of forest goods etc.

The various economic activities relating to forest that are presently covered under the
SNA are: (a) forestry (eg. planting and conservation of forests, collection of forest products,
charcoal burning in forests); (ii) logging (eg. felling and rough cutting of trees, hewing or rough
shaping of poles, blocks, etc) and transportation of forest products to sale depots, assembly
centers; and (iii) farmyard wood (industrial wood and fuel wood collected by the primary
producers from trees outside regular forests). The forest produce is classified into two broad
groups: (a) major products comprising industrial wood (timber, round wood, match and pulp
wood) and fuel wood (firewood and charcoal wood) and (b) minor products consisting of a large
number of heterogeneous items such as bamboo, fodder, lac, sandalwood, honey, resin, gum,
tender leaves, etc.

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 There are many services like eco-tourism, fodder, carbon sequestration, bio-perspective
value and watershed benefits, medicinal plants provided by forests that are not either captured or
properly reflected in the SNA.

A variety of data with regard to land such as nine-fold classification of land use, area,
production and yield, etc., are available. Some information relating to soil survey is also
maintained.

In India, most of the rivers are originated from hills and forests. In a predominantly
agriculture oriented economy like India, the rivers and water availability play a vital role in the
livelihood of the people. The up-keeping of these scarce resources and maintaining them as the
pristine resource hold paramount importance in the Indian context. ‘Water and Related
Statistics’ published by the Central Water Commission covers data on water and related
resources, resource utilization, production related performance & economic efficiency, financial
performance and social and environmental performance. Some of the water related data are not
available on regular basis but based on surveys/studies.

Discharge of effluents into rivers and surface water bodies creates multiple problems in
terms of degradation and contamination of water resources (both surface and ground water
reserves), which have a direct impact on health of the living beings and agriculture. Some water
pollution data are available with the CPCB.

Data on Air pollution are also available with CPCB for many of the cities in India which
broadly cover the extent of pollution of the air due to Carbon Dioxide, Sulphur Dioxide,
Suspended Particulate Matter (SPM), Nitrous Oxide etc.

Air pollution could be the result of many factors. Some of which could be vehicular,
industrial, land-fill sites, rituals and performance based on faith etc. Data availability based on
the source of pollution are not available at present. Data are not available with regard to emission
load, fuel usage by type of vehicles etc.

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 Data on energy uses by fuel type like coal, fuel oil, natural gas, nuclear and non-
renewable energy are being compiled by the Office of the Coal Controller of India, Ministry of
Petroleum and Natural Gas and Ministry of Renewable Energy and are regularly available. The
Central Electricity Authority brings out the annual figures on installed capacity, power
generated, type of fuel used and CO2 emissions from the power plants under their jurisdiction.
The activities of the unorganized sector which depend on fuels like coal, diesel etc for generation
of power are not captured and such data are not available.

Some data on biodiversity, though compiled, are not on regular basis but based on
studies/surveys undertaken in certain time intervals.

Issues and Conclusion

In the past two decades, a great deal of attention has been given to the ensuing natural
resources scarcity and impact of environmental pollution on the human welfare. SEEA has been
developed as a satellite account, integrating different methodologies proposed for environmental
accounting into a single organised framework without threatening the consistency of SNA.

NRA not only includes both marketed and non-marketed goods and services generated by
the natural environment, but also focuses on management aspects of the environment and is a
convenient way to organize physical and economic accounts in a manner that demonstrates the
linkages between the environment and the economy. Enumeration of the natural resources
becomes important for better planning because unscientific uses of scarce and non-renewable
resources could affect future flow of goods and services from the environment causing losses to
human welfare potential for future generations. Any economy which follows a sustainable path
of development will need to know the size of natural wealth it holds.

Some of the important issues which relate to implementation of SEEA are:

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(i) As environmental accounting is important, SEEA needs to be implemented. At the same
time, it is difficult to ensure availability of data as there are vast data gaps. Therefore, in order to
make an immediate beginning towards implementation of SEEA, some of the key data sets
required need to be identified so that necessary action is initiated to collect such data sets.
Thereafter, in course of time, efforts can be made to fill other data gaps.
(ii) Data limitations in the areas of environmental taxes, pollution, ecosystem services etc.
need to be addressed.
(iii) Pricing of environmental goods and services is an important area which needs attention.
There are risks in applying some valuation methods in places having low literacy and
environmental awareness. A great deal of debate is required on valuation of degradation and how
to locate this valuation in the accounting framework.
(iv) There is thin dividing line between defensive and non-defensive expenditure. There is
also the problem of more disaggregated valuation of data for having reliable estimates of
defensive expenditure.
(v) Instead of treating environmental cost as a discount from real national income, it can also
be looked from a different angle of treating it as investment for the future. This area requires
debate and research.
(vi) For effective implementation of SEEA, capacity building in terms of training and sharing
of country experience is a must.

The Indian government has already undertaken some studies on NRA and efforts are on
to bring out sector-wise frameworks and develop methodologies towards compiling satellite
accounts on environment.

References

(The studies conducted by CSO on NRA have been taken into account while preparing this
paper, in addition to the below mentioned references)

Bram, Edens and Hann Mark de (2010), “How the SEEA Contributes to Environmental
Sustainability Policies”, IAOS Conference, Santiago, Chile, October.

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Dash, J (2008), National Accounting and Natural Resource Accounting, Environmental
Accounting: Explorations in Methodology, Manak Publications Pvt. Ltd, New Delhi, pp-44-51.

Government of India (2010), Economic Survey, 2009-10, Ministry of Finance, Department of

Economic Affairs.

Government of India (2010), National Accounts Statistics, 2010, Ministry of Statistics &
Programme Implementation, Central Statistics Office.

O’Connor, Martin, [Link] (2001), Greening National Accounts, Cambridge Research for the
Environment (CRE), Number 9.

Peskin, Henry. M and Angeles, Marian S (2001), “Accounting for Environmental Services:
Contrasting the SEEA and the ENRAP Approaches”, Review of Income and Wealth, Series 47,
Number 2, June, pp-203-219.

United Nations (1993), System of National Accounts, Inter-Secretariat Working Group on

National Accounts, Commission of the European Communities – Eurostat, International
Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, and
World Bank.

United Nations (2003), Handbook of National Accounting - Integrated Environmental and

Economic Accounting, United Nations, European Commission, International Monetary Fund,
Organisation for Economic Co-operation and Development, World Bank.

United Nations (2010), Framework for the Development of Environment Statistics, Department
of Economic and Social Affairs, Statistics Division.

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