NEW DELHI: The government should sell off half its public sector undertakings and use the $200 billion it will thus make to build environmental assets, 13th Finance Commission Chairman Vijay Kelkar said here Friday.

"India built physical assets by setting up public sector undertakings when that was needed. Now private firms are able and willing to buy these assets. But they are not willing to build natural resource assets, which is what India needs now. That is what the government should build," the noted economist said.

Kelkar was speaking at the release of a report by the think tank The Energy and Resources Institute (TERI) on what India should look like in 2047, a hundred years after independence.

With just about a month left before the 13th Finance Commission submits its report, Kelkar said there were three inter-state issues "where we need to shift from negative to positive externalities through transfers -- forests, green energy and water". Externalities are the unintended consequences of an action.

Releasing the report, Environment Minister Jairam Ramesh predicted that by 2015, India would include environmental resources in its economic accounting and planning.

While commending TERI for providing a blueprint for India's growth without damaging the environment, Ramesh pointed out that the country had excellent laws to protect nature, but they were not being implemented.

"Environmental governance is the key," the minister said, pointing to his plans to start a national environment protection authority and a national green tribunal as steps in this direction.

Presenting the highlights of the report, TERI Director General Rajendra K. Pachauri said land and water constraints would impede India's growth unless these issues were addressed and the question of social justice was addressed.

Pachauri also spoke of the need for states and local governments to take over environmental governance. "We need this," he said, "but efforts at decentralisation first need to address issues of capacity and accountability".

While addressing the urgent need to add to natural assets such as water, land or forests, Pachauri sought "renewed emphasis on efficiency and equity" in the use of these resources. The report also had concrete proposals on how to build India while taking care of biodiversity, minimising air pollution, handling municipal solid waste and so on.