Natural Resource Accounting (NRA) | 01 Aug 2022

Why in News?

Recently, the Comptroller and Auditor General of India has stated that it would be coming up with report on Natural Resource Accounting (NRA) by November 2022.

• It is an attempt to develop accounting systems to help monitoring their responsible utilisation, which will in turn lead to sustainability.

What is Natural Resource Accounting (NRA)?

• About:
  • Natural Resource Accounting is a process of estimating the value of natural resource depletion and environment degradation due to economic activities.
  • The concept of NRA was emerged to capture the intimate interplay between the various components of the natural environment and the economic progress of a country.
  • It is based on the concept - ‘measurement of a resource leads to its better management’. 
• Historical Perspective:
  • The need for NRA took its first step at the United Nations (UN) conference on Human Environment in 1970 (Stockholm Conference) when the relationship between economic development and environmental degradation was discussed for the first time. 
  • The Brundtland Commission, set up by the UN, articulated the idea of close association between the environment and economic activities in 1987, which was followed up by environmental accounting and the Earth Summit at Rio de Janeiro in 1992.

What are the Initiatives Taken to Promote NRA?

• Initiative at Global Level:
  •  UN General Assembly resolution titled, "Transforming our world; the 2030 agenda for sustainable development" (25^th of September, 2016) which got the approval of more than 190 countries, requires the preparation of Natural Resource Accounts.
    • India is a signatory to this resolution.
  • The UN, in 2012, adopted the System of Economic and Environmental Accounting (SEEA). It is the latest internationally accepted framework for NRA.
    • Around 30 nations like Australia, Canada, China, France, and Germany have attained various degrees of success in adopting environmental accounting.
  • The Natural Capital Accounting and Valuation of the Ecosystem Services (NCAVES) Project, funded by the European Union, has been jointly implemented by the United Nations Statistics Division (UNSD), the United Nations Environment Programme (UNEP) and the Secretariat of the Convention of Biological Diversity (CBD).
    • India is one of the five countries taking part in this project - the other countries being Brazil, China, South Africa and Mexico.
    • It is an umbrella term covering efforts to make use of an accounting framework to provide a systematic way to measure and report on stocks and flows of natural capital.
• India-Specific Initiatives:
  • The CAG established the Government Accounting Standards Advisory Board (GASAB) in 2002 with the aim to improve standards of Governmental accounting and financial reporting to enhance the quality of decision-making and public accountability.
    • It consists of representatives of all accounting services in GoI, regulatory authorities like RBI, ICAI and State Governments.
  • The CAG of India is also a member of an international body of Supreme Audit Institutions, called WGEA (Working Group on Environmental Auditing), which suggested (2010) that the audit institutions should aid their countries to adopt Natural Resources Accounts.

What is the Significance of Natural Resource Accounting?

• Interrelation between Economy and Environment –
  • Quantifies the nonrenewal damage to the environmental resources and assists in determination of development in real terms.
• Aid to policy framing: sound database –
  • To help policy makers to understand the potential impact of their decisions.
• Managing SDGs –
  • NRA has deep inter-linkages with the Sustainable Development Goals (SDGs) as 4 out of the 17 goals directly relate to management of natural resources and their accounting.
• Combating Climate change –
  • Asset and flow accounts have been recognized as a useful framework for monitoring, measuring and analysing climate change.
• International commitments –
  • Besides fulfilling the SDGs, it would help India become a part of the group of elite countries in generating Asset Accounts.

What are the Challenges Related to Accounting of Natural Resources?

• There is lack of proper training and capacity building among state officers.
• Limitations in preparing the asset accounts - mapping the periodicity of data.
• Multiple agencies are involved in data collection for resources; it may give rise to the issues of data sharing/data conflict.

Source: BS