Journal of Xi'an University of Architecture & Technology ISSN No : 1006-7930

Environmental Accounting and Reporting in : A Case Study of Limited

Dr. Pranjal Pratim Dutta Assistant Professor Department of Accountancy Commerce College (India)

Abstract

Environmental Accounting is a tool by which one can understand the role implemented by an organization for environmental safety and welfare. Since an enterprise is a corporate citizen like a human being, it is necessary to behave by the corporate entity as a good citizen. Similar to the economic performance of a corporate entity, its action in relation to the environment and society is required to be judged. To mandate the social responsibility of corporate sector for better development of Indian environment, there are many laws have been enacted and amended from time to time. The conservation of energy has been considered as Environmental Accounting by The International Accounting Standard Board (IASB) organized under International Financial Reporting Standard Foundation. India, being a developing country it is necessary to promote economic development by safe or less environmental degradation i.e. the development must be environmentally sustainable. Therefore, accounting and its disclosure relating to environmental issues have been considered as one of the important and ethical dimension of corporate reporting. The present research paper aims on exploring the concept of Environmental accounting, its practices and legal issues as well as the Environment Accounting and Reporting Practice adopted by Numaligarh Refinery Limited situated in the District of Golaghat, Assam (India).

Key words: Environmental Accounting; Sustainability; Constitution; Corporate; Reporting

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Introduction At present most of the Indian corporate citizens recognize ecological and social sustainability practices as part of their goal. Increasing pressures on the environmental issues worldwide warming environmental degradation and as a result environmental accounting has gained significantly. Most of the large companies in India started reporting on environmental costs following the guidelines of the “United States Environmental Protection Agency”. The implementation of environmental accounting and reporting system can be beneficial to the corporate citizen to achieve their goal and it can help the others i.e. all stakeholders in reducing the costs and economic development of the country as well without degrading the environment. Environmental Accounting is an accounting which incorporates the contribution of environment and natural resources, and changes therein, and measures their effects on Gross National Product (GNP) an Net National Product (NNP) to reveal true maximum income which a nation can consume while maintaining a sustainable development and growth without putting at risk the interests of the present and future generations. Environmental accounting of the corporate entities generally discloses the following information relating to environmental issues in the Director’s report or discloses separately: 1) Environmental costs relating to current and past activities. 2) Data reflecting the reduction of toxicity. 3) Waste management system. 4) Capital expenditures for pollution control and prevention. 5) Projected environmental costs and benefits thereon. Objectives of the study: 1) To understand the practice of environmental accounting and reporting. 2) To study the constitutional provisions and other legal issues concerning environmental accounting in India. 3) To study the environmental accounting and disclosure practices of NRL during last three accounting years i.e. 2016-17 to 2018-19.

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Review of literature: Mukesh Chauhan (2005) in his study reveals that though environmental accounting is required to be maintained by the corporate sectors, still corporate sectors of India is not very enthusiastic in this regard. Some corporate units have been describing cost and benefit figures conforming environmental issues in their director’s report. According to him it is required to be maintained by the corporate sector seriously following the legal issues which will fulfill the need of economic development with environmental safety. For sustainable development of country, a well-define environmental policy as well as proper follow up and proper accounting procedure is a must.

M.C. Rathwa (2008) in his report emphasizes on environmental impacts from cost benefit and measure eco assets and liabilities for the organization. He pointed out the urgent need of a generally accepted environmental accounting standard to keep pace with sustainable accounting practice.

Ragini (2012) studied various disclosure practices of the top one hundred Indian, US and Japanese companies for a period of five years, i.e. from 2001 to 2005. She found that the companies under study of the three countries have maintained a remarkable improvement of their disclosure of environmental issues over the five years. A number of organizations are working to improve disclosure on non-financial items; some of them are International Accounting Standard Board (IASB), Financial Accounting Standard Board (FASB), Organization for Economic Cooperation and Development (OECD), and European Commission (EC).

Dr. Anita Shukla and Nidhi Vyas (2013) in their research paper discussed about the concept of environmental accounting and reporting with special reference to ONGC and BCPL. They found that Environmental policies of the companies are up to the mark but their finding doesn’t reflect the ecological cost, liability and ecological expenditure.

Savita Ranga and Rahul Garg (2014) in their research paper described briefly the legal framework for Environmental Accounting in India. They also discussed about the CSR reporting and how a corporate citizen is trying their level best to focus themselves as a socially responsible entity.

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Research Methodology: This research paper is based on secondary data collected from official websites of corporate entities, research papers published in reputed journals, annual audited reports of Numaligarh Refinery Limited. Initial investigation was conducted by visiting the official website of NRL followed by an in-depth analysis of Annul Reports, Sustainability Reports and other reports for three financial years from 2016-17 to 2018-19. Constitutional Provisions and Environmental Accounting in India: There are various provisions laid down in the Constitution of India. The Directive Principle of State Policy reveals that “it is the responsibility of the state to protect and improve the environments and save the forest and wild life of the country”. Article 51A of the Constitution said that it is the basic responsibility of each and every citizen of India to protect and develop the natural surroundings. A company, being a citizen like human being must follow the constitutional provisions pertaining to the environment is concern. It is duty of the corporate to behave ethically regarding the use of environmental resources. The government of India is enacting different laws for the protection of Environment. Important laws to save the Environment are: Factories Act 1948, Prevention and Control of Pollution Act 1974, Forest (Conservation) Act 1980, Air (Prevention and Control of Pollution) Act 1981, Environmental Protection Act 1986, The National Environment Tribunal Act 1995, Water Biomedical Waste (Management and Handling) Act 1998, Ozone Depleting Substances ( Regulation and Control) (Amendment) Rules 2002 are the few. In the year 2011, the Security Exchange Board of India (SEBI) made it compulsory to the listed companies to report on Environment, Social and Governance (ESG) initiatives undertaken, according to the key principles pronounced in the “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business”. Profile of Numaligarh Refinery Limited Numaligarh Refinery Limited is a Mini Ratna awarded Public Sector undertaking set up at Numaligarh in the district of Golaghat (Assam) in accordance with the provisions of historic Assam Accord signed on 15th August 1985 for industrial and economic development of the region. Originally, the 3 MMTPA refinery was dedicated to the nation by the Hon’ble Prime Minister Shri A.B. Vajpayee on 9th July, 1999 and has been able to earn remarkable performance since commencement of commercial production in October, 2000. On 16th January, 2019 the

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Cabinet Committee of Economic Affairs (CCEA) of the Government of India has accorded investment approval to enhance the capacity of NRL from 3 to 9 MMTPA with project cost of

`22,594 crores. An amount of `1,020 crores has also been approved by the government as capital

subsidy. The company produces LPG, Naphtha, Aviation Turbine Fuel (ATF), High Speed Diesel (HSD), Raw Petroleum Coke (RPC), Sulphur, Wax, Nitrogen, Calcined Petroleum Coke (CPC) are the key. The shareholding pattern of the company is: Corporation Limited (BPCL) 61.65%, Oil India Limited (OIL) 26% and the Government of Assam 12.35%. But Oil India Limited (OIL) may take over BPCL’s entire holding i.e. 61.65% in Numaligarh Refinery Limited to continue the PSU character of NRL as the government of India is proposing to disinvestment of 53.29% entire stake in BPCL.

Table: 1 Financial Performance of NRL (` in Crore)

Particulars Financial Year 2018-19 2017-18 2016-17 Gross Revenue from Operations 18,511.15 15,923.19 13,946.91 Profit( Loss) Before Tax 3,051.91 3,142.34 3,147.57 Profit After Tax 1,968.10 2,044.65 2,100.57 Net Worth 5,550.68 5,044.35 5,180.64 EPS 26.76 27.80 28.56 Source: Compilation from collected data

Numaligarh Refinery Limited witnessed highest-ever revenue at ` 18,511 crore in 2018-19,

registering a growth of 16.25%. The Earnings per Share (EPS) of the company stood at ` 27.80

in 2017-18 while Net Worth reached at ` 5,551 crore in the year 2018-19.

In order to the complying provisions of Department of Public Enterprise (DPE) guidelines and the provisions laid down in Section 135 of the Companies Act, 2013, it has a Corporate Social Responsibility (CSR) and Sustainability Committee headed by Independent Director as chairman to look after and implementation of different project under CSR and Sustainability. Regular Environment Audit since its commercial production has been conducting in compliance of the standard set by pollution control board and other regulatory authority from time to time.

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Table: 2 Major Environmental Sustainability activities of NRL and amount earmarked in last three years Key Indicators Amount outlay ( in lakh) during last 3 years 2018-19 2017-18 2016-17 1. Installation of SWATCH Waste destruction 15.67 - - system for mixed solid waste decomposition in the neighborhood of the Refinery 2. Plantation of different saplings including 4.34 - - maintenance, conduct base line survey for developing bamboo cluster for sustainability livelihood generation and training on bamboo plantation 3. Setting up of waste handling ( plastic) unit as a 10.15 - - part of Swacch Bharat Mission 4. Distribution of free LPG connection to BPL 0.52 - - household to promote smokeless village 5. Setting up of Waste handling( plastic) unit as a 10.15 - - part of Swacch Bharat Mission 6. Project Parichannata to provide waste hanling - 928.00 - equipment to 10 Nos of Municipalities/ Town Committees to promote Swacch Bharat Mission 7. Project under National Green Highway Mission - 72.68 - 8. Development and Protection of River Bank - 362.90 - towards water body management 9. Support to District Forest Department by way of - 41.36 - supplying vehicle, awareness program, tree plantation etc. towards environmental protection 10. Promoting Environment Protection through - - 72.04 awareness programmes, plantation drives, waste paper recycle etc. 11. Veterinary vaccination camps for animal welfare - - 2.30 and providing ambulance under the head Forest and Environment, Animal Welfare etc. Source: Compilation from collected data Numaligarh Refinery Limited is well concerns about Environment Management system and put its high priority in respect to emission, water consumption, solid waste management, noise and reducing carbon footprint. Following are the different steps of NRL for Environment and Sustainable management:

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Centre of Excellence for Sustainable Materials NRL has set up NRL Centre of Excellence (CoE) for Sustainable Materials in the campus of Indian Institute of Technology, on 14th February, 2020. It is a first academia-industry venture established with the broad objective to develop green technology and sustainable materials from various waste and byproducts sourced from multiple sectors like petroleum industries bio refineries and agro-industries. Bamboo Bio-Refinery Assam Bio-Refinery Private Limited (ABRPL) is a Joint Venture Company incorporated in on

4th June, 2018 with the estimated project cost of `1259 crore. The shareholding pattern of the

company is 50% by NRL, 28% by M/S Fortum 3BV, Netherland and 22% by M/S Chempolis Oy, Finland. The main objective of the JVC is to convert bamboo into Bio-fuel.

Environment Friendly and Solid Waste Management System

NRL has an environment friendly and proper solid waste management system to store or disposed off solid wastes (hazardous/ non-hazardous) generated from its operation. The main objectives of solid waste management system are:  To protect human health and conserve energy and natural resources through waste recycling and recovery.  To reduce or eliminate, the generation of solid wastes including hazardous wastes as far as possible.

Flare Gas Recovery System NRL has ground flare and elevated flare system to avoid any adverse impact of the illumination of flare on animals and migratory birds in the surrounding wildlife sanctuaries including . Solar Power System NRL has 100 KWH solar PV Panel on the roof top of administrative building and has taken initiative to install 50 KW Solar Power Plant on the roof top of corporate office building in Guwahati. The installation of a mega 1.0 MW Solar Power Project in NRL premises which is under process.

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Environment and Ecology There is a safe and eco-friendly technologies as well as well defined Environment Management system at NRL. It is under International organization for Standardization (ISO) 14001, Occupational Health and Safety Assessment Series (OHSAS) 18001 and International Safety Rating System (ISRS) protocols. NRL has Carbon Monoxide (CO) Analyzer and Particulate Matter (PM) Analyzer to measure pollution. Due to sustained effort and implementation of control measures, emitted Green House Gas (GHG) foot print of NRL for the year 2018-19 was 0.216 MTCO2E compared to previous year’s 0.24 MTCO2E. The company is certified under Integrated Management System (IMS). It has also a butterfly eco-system in the butterfly valley in township and a unique herbal garden with some rare medicinal plants. Concluding Remarks NRL has its well defined Environment Management System and it has in-built measures to minimize and control pollution. But potential negative impacts from the proposed bio-fuel plant on forest area and greater Kaziranga eco-system as well as pollution-related hazards in the adjacent area need special concentration. The people of the adjacent area from time to time disappointing that the waterways in the nearby village got contaminated after the inception of the refinery because the wastewater and rainwater spilled from the refinery during monsoon season pollute water sources. According to the sources of the companies undergoing operation, Formicobio, an environmentally sustainable and low-emission technology for processing bamboo into cellulosic ethanol will be used to make the environment pollution-free. Despite the fact that the company keeps its Sustainability Reporting to disclose the economic, environmental and social issues along with the Annual Financial Reports but the report did not make clear on what issues to be disclosed or what issues are omitted. Environmental accounting and reporting practices in India are in the budding stage. There is no uniform or holistic approach for Indian corporates to disclose or reporting of environmental accounting. They only disclose the issues pertaining to their company on environmental issues. Therefore, a specific policy as well as proper accounting and reporting procedure is must for sustainable development of the country.

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References: 1. Abdel Rahim, Heba Y. and Abdel Rahim, Y. M (2010), Green accounting – a proposition for EA/ER conceptual implementation methodology, Journal of Sustainability and Green Business, Green Accounting, 1-18. 2. Banerjee Dr. Bhabatosh (2006): Corporate Environmental Accounting and Reporting: The Chartered Accountant: April. 3. Chauhan Dr. Mukesh (2005): Concept of Environmental Accounting and Practice in India: The Chartered Accountant (November 2005). 4. Dr. Minimol M.C and Dr. Makesh K.G (2014).Green Accounting and Reporting Practices among Indian Corporates. Asia Pacific Journal of Research Vol: I Issue XIV, February. 5. Dr.Preeti Malik and Dr. Alka Mittal (2015). A Study of Green Accounting Practices in India. IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828Vol. 4, No.6, December. 6. http://economictimes.indiatimes.com/et500list.cms, retrieved on 18, March, 2020. 7. Malarvizhi P, Ms.Sangeeta Yadav (2008),Corporate Environmental Reporting on the Internet: An Insight into Indian Practices, 11th Annual Convention of the Strategic Management Forum, May 8 – 10,Indian Institute of Technology, Kanpur, India. 8. Nasir Zameer Qureshi et.al.,(2012). Environmental Accounting and Reporting: An Essential Component of Business Strategy, Asian Journal of Research in Banking and Finance, Vol.2 Issue 4, April. 9. Parameswaran, V (2011), Environmental accounting: Indian Perspective, International seminar on Green economy and Official Statistics, 6-8, July. 10. Ragini (2012). Corporate disclosure of intangibles: a comparative study of practices among Indian, US, Japanese Companies. J Decis Makers 37(3):51-72. 11. Rahman, M. A. and Muttakin, M. B. (2005). Corporate Environmental Reporting Practices in Bangladesh – A Study of Some Selected Companies. The Cost &Management, 33(4), 13-21. 12. Ramesh, (2013). A Study of Environmental Accounting Practices in selected Indian Companies. Kuvempu University, Jnana Sahyadri, Shankaraghatta -577451, December. 13. Rathwa M.C. (2008), Environmental Accounting and Reporting for Sustainable Development,

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14. Sajad Gholami, Ayat Tamri Neia, Behzad Gohari, Bahman Kiani Rad (2013): Environmental Accounting (From Concept to Practice): Journal of Basic and Applied Scientific Research. 3(1)439-443. 15. Savita Ranga & Rahul Garg (2014).Legal Framework for Environmental Accounting in India. International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 Volume 3, No. 6, June. 16. Shukla Dr. Anita &, Nidhi Vyas (2013): Environmental Accounting & Reporting in India (A comparative study of Bharat Petroleum Company Limited & Oil & Natural Gas Company Limited): Pacific Business Review International: Volume 5 Issue 7 (January 2013).

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