Environmental Accounting and Reporting in India: a Case Study of Numaligarh Refinery Limited
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Journal of Xi'an University of Architecture & Technology ISSN No : 1006-7930 Environmental Accounting and Reporting in India: A Case Study of Numaligarh Refinery Limited Dr. Pranjal Pratim Dutta Assistant Professor Department of Accountancy Golaghat Commerce College Assam (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 Volume XII, Issue IV, 2020 Page No: 1680 Journal of Xi'an University of Architecture & Technology ISSN No : 1006-7930 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. Volume XII, Issue IV, 2020 Page No: 1681 Journal of Xi'an University of Architecture & Technology ISSN No : 1006-7930 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. Volume XII, Issue IV, 2020 Page No: 1682 Journal of Xi'an University of Architecture & Technology ISSN No : 1006-7930 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 Volume XII, Issue IV, 2020 Page No: 1683 Journal of Xi'an University of Architecture & Technology ISSN No : 1006-7930 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: Bharat Petroleum Corporation Limited (BPCL) 61.65%, Oil India Limited (OIL) 26% and the Government of Assam 12.35%.