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Presentation on

Natural Capital Accounts(Forestry Sector)

By:Government of Himachal Pradesh

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Coverage

(i) Introduction(ii) Why Forest accounts(iii) Current & Past experience(iv) Policy issues(v) How would forest accounts help(vi) Issues with SNA(vii) Way Forward

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55673 Sq Km [2 D Area]86384 Sq Km [3 D Area]

Percentage increase as per 3D area = 56%

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Introduction to Himachal Pradesh

Unit 2011 Census

Area Sq. Kms.

55673(2D Area) 86384(3DArea)

Districts No. 12

Tehsils No. 123

Development Blocks No. 78

Census Village s No. 20690

Gram Panchayats No. 3243

Towns No. 57

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Demographic Profile of the StateHP All India

Population (million) (Census 2011) 6.8 1121Decennial Growth Rate(%) 12.94 17.64Population Density per sq. km. 123 382Sex Ratio (Females per 1000 males) 972 943Rural Population 89.96 68.84Literacy Rates 82.80 73.0Life Expectancy (2006-10) 70.0 66.1Male 67.7 64.6Female 72.4 67.7Forest Area as a %age of total Area 66.5% 21.0%

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Classification of ForestsArea(Km²) Percentage

Reserved Forest 1896 5.1

Demarcated Protected Forest

11400 30.8

Un-Demarcated Protected Forest

21643 58.4

Unclassed Forest 977 2.7

Other managed by Forest department

369 1.0

Not managed by Forest department

748 2.0

Total 37033 100

Economy of

Himachal Pradesh

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Growth Performance

6.3

5.2 5.1

8.1

7.6

8.4

9.1

8.5

7.4

8.1

8.7

7.3

6.1 6.2

4.4

5.8

3.8

8.5

7.3

9.0

9.7

9.0

6.7

8.1

9.3

6.2

4.5

4.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

H.P. All IndiaSource: DES, HP

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Gross State Domestic Product (GSDP) at current prices

Rs.

in c

rore

YearSource: DES, HP

24077

2712730281

33963

41483

48189

56980

64957

73710

82585

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

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YearsCurrent Prices

Constant Prices

2004-05 33350 333482005-06 36951 358062006-07 40396 381952007-08 43966 401432008-09 49909 416662009-10 58402 434922010-11 68297 466822011-12 75185 492032012-13 83899 517302013-14 92300 54494

Per Capita Income (PCI) (in Rs )

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Percentage Contribution of GSDP

19.15%

40.26

40.59% Primary

Secondary

Tertiary

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Why Forest Accounts

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� The Forests of Himachal Pradesh known for theirgrandeur and majesty are like a green pearl in theHimalayan crown.

� The State has vast forestry resources spread overdifferent agro climatic zones throughout the length& breadth of the State

� This life supporting systems are presently undergreat stress due to impact of modern civilization,economic development and growth in human andcattle population.

� At present the forests are not being looked as asource of revenue and sustained supply of rawmaterial.

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�The emphasis now is on protection andconservation of forests, environment andwild life.

�Major source of revenue to the Stateexchequer prior to the State Governmentdirection on complete ban of green feelingof trees was from the forest

�The present accounting system at currentprices include the activities like tourism butnot Eco-tourism, watershed protection,carbon storage and bio diversityconservation which implies that the forestrysector have to reoriented for the real growth

Year Contribution of forestryto Total GSDP

2004-05 5.952005-06 5.932006-07 5.852007-08 5.732008-09 5.122009-10 5.032010-11 4.342011-12 5.062012-13 4.942013-14 4.80

Contribution of Forestry and Logging sector

Why Forest Accounts-contd.

• Present System of National accountsprovides false signals to the policy makers. Itconfuses the depletion of valuable assetswith the generation of income resulting inillusory gains in income and permanentlosses in wealth (Goal of Sustainabledevelopment)

• Natural resources being part of wealth of thenation, The Natural Resource accountingneeds to be integrated with System ofNational Accounts (SNA).

Why Forest Accounts-contd.• Non marketed products are also not

included in the national accountsalthough they are extremely crucial torural livelihoods.

• Difference between “Produced” and“Natural” Capital.

• The value of forest degradation/depletion is not recorded as a cost inSNA.

Structure of the Economy

� Above diagram reflects that the secondarysector contributes 41% to the State GSDPwhereas it employs only 1.65% of the totalworkers. In contrast, the primary sectorcontributes only 19 per cent to the State GSDP& 63 % workers are dependent on this sector.

19.15

40.26 40.59

62.58

1.65

36.77

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Primary Secondary Tertiary

GSDP contribution %age Workers

perc

ent

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Current & Past experience

� Environmental and Natural Resource Accounting In India is in developing stage.

� Natural Resource Accounting (NRA) is a revaluation of theNational Income Accounts of a country, adjusting for thevalues of natural resources used in various economicactivities. Natural resources being a part of the wealth ofthe nation, initiatives have to be taken to integrate thenatural resource accounting along with the System ofNational Accounts (SNA).

� The Ministry of Statistics and Programme Implementation(MOSPI) Government of India, being the nodal authority torelease official statistics, has taken significant steps forimprovement of Environment Statistics and also for thedevelopment of framework for the preparation of NaturalResource Accounting in India.

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� India currently follows the System ofNational Accounts (SNA-1993)

� Forest services provide intermediate inputsto other sectors such as livestock grazing,agriculture, Hydropower and tourism.

� Value of these services are not recognizedand hence, is attributed to the using sector,not to forestry.

� To conserve environment and to protect theState from climatic change the governmenthas already ordered complete ban onpolythene and plastic bags & containers

�Economic activity in the sub sectors of theforestry sector will be fully accounted in termsof its actual potential and use accountslinkages with the other sectors of theeconomy.

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� The estimation of Gross Value Added fromthe “forestry and Logging “ sector ispresently carried out by the productionapproach.

� In this approach the state is evaluatingtimber, fuel wood, NTFP and fodder andTree outside the forest area (TOF). TOF hasbeen included in the 2004-05 series

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Policy issues

• Forest Policy 1988 focuses on environmentalstability , restoring ecological balance andpreserving the forests but National AccountingSystem considers only logging incomes in theaccounting system resulting in under valuation offorestry sector’s contribution.

• For Sustainable development, It is necessary tohave a clear idea regarding the extent and nature ofdegradation across various natural resources sothat real costs of degradation are accuratelyestimated.

• Estimation of gross value added from the forestryand logging sector in India is presently carried outby the production approach. There is a need toestimate and integrate tangible and intangiblebenefits of the forestry sector in SNA.

Policy issues-contd.

• How to ensure that forests get rightful place inMacro economic policy

• Economy-wide linkages with forestry needs tobe improved by– Demonstrating improved measures of the

economic benefits from forest ecosystems toall sectors of the economy

• Ban on green felling- should it continue or weshould manage forests for revenue generation?

• For natural forests, natural growth is notconsidered an increase in inventory.

Policy issues contd.• Identification of beneficiaries and to ensure

their contribution in regeneration /conservation of forests

• Alternative policies in lieu of green felling-PES/NTFP/Carbon markets

• Net benefit method vs User Cost method ofcalculating depletion

• Inclusion of Maintenance Costs

• Valuation of Non- Marketable EnvironmentalServices

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Hydel Status

Installed

Out of the total potential only 36% has been harnes sed till now

Year Indian Foreigners Total2005 69.28 2.08 71.362006 76.72 2.81 79.532007 84.82 3.39 88.212008 93.73 3.77 97.502009 110.37 4.01 114.382010 128.12 4.54 132.662011 146.05 4.84 150.892012 156.46 5.00 161.46

Tourist arrivals in Himachal Pradesh (in lakh)

� Tourism contributes only about 7.2% of total GSDP of the state.

Initiative of Himachal?

• With the policy issues listed in the previousslides and

• As a part of the technical assistanceprogramme of the World Bank’s DevelopmentPolicy Loan Promoting Inclusive Green Growthand Sustainable Development in HimachalPradesh and

• To assess the forest wealth and itscontribution to the other sectors (Tourism &Hydropower).

How would forest accounts help?

• Can help in analyzing trade-offs– Between cutting down upstream forests for timber

and minerals versus the risk of floods downstream• Better inform development policy through improved

sectoral planning and more equitable social allocations

–Dependence of other sectors on healthyforests

• Would capture both – resource use as well as damagingeffects of degradation

• Forests accounts at watershed level can help designPES schemes

How would forest accounts help?

• Accounts are descriptors to assess

performance

• Incomplete if natural assets are ignored

• Crucial role of forests undervalued in SNA

• Forests are “self-generative but degradable

asset”

• If misused, they depreciate and impact

economic well-being

Issues with SNA

• GDP is an unsuitable indicator ofsustainable development (Invisible valuesare not captured)

• GDP cannot record trade-offs ( Nonmarketed products)

• Natural capital degradation costs India $36billion to $124 billion annually, or between2.6% and 8.8% of 2009 gross domesticproduct (GDP). (World Bank)

Way Forward

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To implement the proposed systemof Forest Accounts in theState/Country and to overcomeimpediments in the system ofeconomic valuation of forest of thecountry for estimating their truecontribution, the following steps haveto be applied:

• Preparation of physical area, volume ofForest resources in Himachal Pradesh asper SEEA framework.

• Estimate the exact potential andcontribution of NTFP to the state.

• Understand the exact contribution of theForests to Tourism sector of stateeconomy.

• Physical accounts vs Monetary accounts (Develop PSUT tables for the timber and NTFP)

• Establish close collaboration between data producers and policy & decision makers

• Creation of National/State Level Coordination Committee/ Working/Expert group

• Development of Institutional arrangement for:-Improvement in data availability (Gaps ?)-Compilation and policy analysis-Capacity building-Communication and advocacy-Indicators for cultural services

• Need for an agreed international standard

Release of Accounts/Report

• With the available SEEA -CF and asper the technical support from the CSO,Govt . Of India the State will able to putfort the said account by the end of thisyear .

• The report can be viewed for commentsand suggestions from website of Stategovernment

www.himachal.nic.in/economics

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THANK YOU