Saturday, February 15, 2014

Ministry of Environment & Forests is a mess…..

Tax payer’s money has been wasted over the last 60 years in India and still over the next few decades we might carry the legacy. The global climate has changed a lot over the last decade. Global economy is well worried about the condition of the global climate. India has been ranked 155 of 178 countries on the green index. Recently Yale University has reported that Delhi the capital of India is the most polluted city of the world beating Beijing. Prime reason behind this is that by vehicular and industrial emissions and 1,400 vehicles which are added to Delhi roads every day. Lack of proper public transport has given birth to private transport.  In other words public transport infrastructure is deliberately not developed since private automobile investments in Indian economy would decline. We are sacrificing our nature and earning profits and growth from the same. In the initial days we did not create proper waste and garbage management since government would not find any private segment to come and bribe them for getting these projects. Later on whatever private companies came they were routed through the political channel to pocket the money into the system.

On the green index, India is worse than all the other BRICS nations - China, Brazil, Russia and South Africa. China ranks at 118; South Africa is the best of these at 72. Switzerland tops the list of 178. Yamuna River itself is one of the biggest examples of devastating condition of the garbage and waste management in India. Over the last decade India achieved 8% GDP growth but failed to create a infrastructure to meet the waste and garbage management matching with the growing population. Now we are planning for another 8% GDP growth over the next 5 years from here and hence there will be stupendous pollution growth and we are sitting at zero place to control and manage the same.

Increase in Death & Hazards
According to the study of Centre for Science and Environment, Indian Council of Medical Research and US-based Health Effects Institute annual premature deaths caused by particulate air pollution have increased by six times since the year 2000. According to another report by The Global Burden of Disease (GBD) report is a world-wide initiative involving the World Health Organization (WHO), which tracks deaths and illnesses from all causes across the world every 10 years. The new findings were released by Aaron Cohen, principal epidemiologist of the Health Effects Institute and co-chair of the GBD Ambient Air Pollution Expert Group. The report says that about 620,000 premature deaths occur in India from air pollution-related diseases each year from 100,000 in 2000. The new type of pollutants like nitrogen oxides, ozone and air toxics are increasing the public health challenge.
City Wise chemical pollutants which we are breathing:

· About 10 per cent of the cities (19) exceed the NO2 standard. Of these, about nine have critical levels. Howrah, Barrackpore, Badlapur, Ulhasnagar and Asansol are the five top critically polluted cities.
·  The concentration of PM10 - particulates that measure between 2.5 and 10 micrometers - in Delhi air has increased more than 350 per cent over the past five years.

·     One city—Lote in Maharashtra—exceeds the SO2 standard. Moderate levels of SO2 are noted in Jamshedpur and Saraikela Kharsawan in Jharkhand; Chandrapur, Badlapur, Ulhasnagar, and Pune in Maharashtra; Ghaziabad and Khurja in UP, Dehradun in Uttarakhand and Marmagao and Curchorem in Goa.

·    Howrah, Barrackpore, Asansol, Durgapur, Sankrail, Raniganj, Kolkata (West Bengal), Badlapur and Ulhasnagar (Maharashtra) have critical levels of NO2 and PM10. Delhi, Haldia, Bicholim, Jamshedpur, Meerut, Noida, Saraikela Kharsawan, Jalgaon and Raipur have high levels of NO2 as well as critical levels of PM10.

We have formed the Ministry of Environment & Forests board for accessing environment hazards coming from various manufacturing and mining projects. The board spend Rs 10,000 cr in the 5 year term from (2007-12) and under the 12th year plan (2012-2017) the same amount have been increased to Rs 170874 cr, an increase of 70%. Well the recent study report of Yale University and moreover you the readers are the best judge about the development being made in the environment segment. Just calculate the loss of property and health we Indians are facing despite of spending Rs.10000cr of the tax payers money.

Many of my friends would come up to compare India with other countries in terms of pollution and its hazards. I fail to understand that why India cannot be teacher and needs always to become a student to learn the same.

Friday, February 14, 2014

Why to Cast Vote in Indian Elections....Better Stop it.

 Did we ever think what we vote and whom we vote and for what purpose we give our vote.  We have been voting over the last 60 years and what we got from every elected 5 years terms of new governments over the last 60 years. Well this is the first time I am covering something on the Indian elections and before I start on I would like to communicate that I am not an master in this subject But as a common man I find my heart to speak few things for the same. The Delhi Assembly is dissolved and now we are in the laps of uncertain times where again a new election might happen and the tax payers money will be spend. At the same time currently with the growth of the Indian media and technological growth where information is freely available has lead to stupendous growth in the analysis level. At the same time the population of India is in the bracket of 30’s which is quite young. We are quite in the level where we are well capable to take the decision of who will rule the Indian economy. Hence we know that whoever wins election corruption would be a part of the system since over the last 60 years we have only created huge gap by making rich more rich and poorer more poor. Rich become super rich has leaded every people to follow unfair trade practices which has lead to increase of corruption. The corruption began from government services end and spread to every corner. The government sectors travelled into the path of corruption since the salary of the government employees were too low and the value of Rupee was increasing slowly. Low salary provoked people to take bribe and also the delay in the system of execution of work at the government end was another provoking tool to accept bribe.

Now standing in 2014 we find that corruption has come to such an level that without which we cannot inhale fresh air. Every time we get into the trap of the Temptations and this time we are in the temptation of getting a higher GDP where the Indian economy would find some growth and our salaries increases. But we forget that we will do the hard work, the farmer would do the farming and we will pay the taxes as we paid over the last 60 years and the economy will run as it was running. Free information and media have exposed the true potentiality of the Indian economy.  The irony of life is that we will vote people and again many scams will take birth just like science discoveries being made.

Can an one explain what is the benefit of giving vote when we know well in advance that there will be many scams. Many of my reads might have gone to hear the promises made by various political parties for the upcoming elections. But did you hear that there will be no scam in the new government who every comes and if there is anything then the entire assembly would be dissolved.  Recently we are watching a advertisement in the media where over the last 10 years development of the Indian economy through infrastructures, telecommunications, banking and other segments. Well it took 10 years to get this small development to happen where the global world has moved into new shapes of growth. We got growth but at the cost of tax payers money. We got growth at the cost of scams and corruptions. In earlier elections  we used to forget what has happened with us since 5 years terms is a big thing where billions of incidents happens in every life and hence we forget from where we started. But a great thanks to media and today’s technological improvisation where we all have the access of every past incidents and this has eased our pressure on our memory. We all know how the past was and from that we  can now derive the shape of tomorrow.

Did you every thought, that over the last 5 years we failed to bring changes in our traditional Tax structure. We failed to introduce Goods and Service tax since this new taxation system would provide relief to the tax payers of India. Since every government is more focused to fill up his own pockets and least bothered about the multiple taxation burden on the common people. We discuss,debate and fight over inflation.But did any government felt to come over this real problem.Inflation would never come down if taxes are not being removed. Once the taxes are removed more transparency would come into the price and cost of the goods.  

Did you ever think that what we pay is nothing but Taxes. We never pay any price but we pay only taxes. What is the utility of casting vote and getting no justice in case of rapes being happening in our society? Did any of you made any calculation about the growth of crimes and rapes over the last 60 years despite of our voting. Did any elected government was able to control and reduce the crimes. Was it able to protect the women of the society. Find out the reason why you want to vote and for whom and whom you will vote. No government would be able to reduce inflation and neither  cost of living. World population has increased but the supply and production have not increased. Please use your technology to decide what you want to do.


Sunday, February 9, 2014

MANAGEMENT SCIENCE EDUCATION ....CHANGES REQUIRED

 A time will come when every Large and Mid-sized company would like to develop its own university where practical based teaching would be provided to the students. In my research there are already many companies where courses have been developed based on their process and requirements which are required for achieving the objectives of their organizations.  Today I am more concerned about the future professionals who will manage the business world across the globe.

We know that our management courses are far behind the global management courses and this mainly due to slow progress of the Indian corporate segment. But in the last decade we have made stupendous growth followed with globalised trade and commerce and phenomenal growth in complex business process. Complex business processes were created to match the global standards since we were already backward in those areas.   But there have been a constant gap which increased in between the professional capability and organizational objectives. This is well proved through the number of students who went abroad for management studies. The real reason is that management science has developed globally but India still remains in the back end.

 Traditional management professional courses needs to have a look since over the years more complex process and new developments in products and process would spook the demand for a change in the management education.  The expansion in innovation and entrepreneur segments has created immense changes in the process and management science hence content of the various professional courses needs to be upgraded.  We need to develop the professional management courses in accordance to the new changes.  The recession of 2008 have proved that the traditional courses are no longer of any use and management science and the complexity related to that have changed dramatically. For example if we discuss about corporate governance we can easily find that there is an radical change and with the recent stringent policies of the regulators, hence the demand  from professionals increases but there is an wide gap between the courses being offered and practicality.

Companies like Reliance, Motorola, and Hindusthan Uniliver have developed internal courses where employees of the organization are groomed and are enrolled in live projects to develop professional qualification matching exactly with the companies’ requirements/objectives.  Diverse geographic business opportunities have increased the demand for multi level and business solution providers. Traditional management science fails to provide these multi level business solution providers. With the advancement of technology the future of management science have changed radically. After the recessions of 2008 cost management have taken radical change where strategic cost management tools and techniques are being focused, replacing the traditional cost management process. Now in the coming decade we need to focus on industry specific cost management strategies where future professionals will match with the exact objective of the companies.  

Now in order to create such course models we need to interact more with the companies and develop the future of course module accordingly. Now many institutes will argue that they are already in touch with the various chambers of commerce like FICCI, CII and local business bodies while developing the modern management courses. Well this is not the correct way since no company will share its objectives or process neither its internal business models where the professionals are required. The best way to develop the future professionals is to put the organizational heads as the teacher of these management institutes and develop the course models under their guidance.  In the coming decade we will find management schools being developed by the private companies who will run their own courses.  These management institutes would become obsolete if proper changes in the management courses are not being incorporated. We need professionals to manage the systems from day 1. This prime reason that specialized knowledge only comes from the companies who are dealing with the same. The complex management science can only create professionals if they are being taught and developed by the companies.

Series 2..Cost Accountants and Cost Records are not required....Why?

In my previous article I gave a part of the reasons behind which Cost Accountants and Cost Accounting is not required. I am thankful to all my readers for reading the same. This time I have got the 2nd part of it where one will clearly understand why we are being removed by simply increasing the limit of Turnover of a company by Rs.100cr and recently it has been shifted to product specific of Rs.100cr turnover. The net worth of the company needs to be Rs 5 to 500cr for which Cost Audit would be applicable.  Now let me take you to some number games through which I would be able to explain the real Game Plan and the Pains of the master minds behind this activity. Before that we have to go through some stories to understand the master minds.

Entrepreneurial dreams of Indian students were always on the front runner. The last biggest move was made by the Indian government to support and increase this dream into larges quantity.  The Union Budget proposing that corporate funding to incubators will come under the Corporate Social Responsibility (CSR) tag.  The move will also help corporations meet the CSR requirement in the new Companies Bill whereby they have to report a spending of at least 2%  of their net profit on CSR. This is also likely to prompt many top-tier education institutes to float their incubation centers. Industry watchers say the budget proposal will give a fillip to funding for on-campus incubators that encourage budding entrepreneurs to start their own ventures.
Numbers ?????
·         Historically the SME sector has over the year’s registered faster growth than the gross domestic product (GDP). While GDP grew 6.7 per cent in 2008/09 and eight per cent in 2009/10, the SME sector clocked 11.4 per cent and 11.6 per cent growth, respectively. There are 29.8 million enterprises in various industries, employing 69 million people. The sector includes 2.2 million women-led enterprises (7.4 percent) and 15.4 million rural enterprises (51.8 percent). In all, the MSME sector accounts for 45 percent of Indian industrial output and 40 percent of exports. Although 94 percent of MSMEs are unregistered, the contribution of the sector to India’s GDP has been growing consistently at 11.5 percent a year, which is higher than the overall GDP growth of 8 percent.

·         While the contribution to GDP remains 17 per cent, it is expected to touch 22 per by 2015 as per some Chamber of Commerce.
·         Adopting the latest IT tools and techniques can help India's small and medium businesses boost revenues by $ 56 billion, while also creating over a million jobs, according to a report by software giant Microsoft.
·         BCG surveyed Brazil, India, China, Germany and the US and found SME revenue could grow by a combined $ 770 billion in these five primary countries if more SMEs could achieve the growth rates of those SMEs that use modern IT tools


The New Company’s Bill 2013 has given another leeway where an individual, a Single Person can form a Private Limited Company.  Before this Bill came into picture last year we witnessed the following things:
·         IIT-Bombay has seen a steady growth in entrepreneurial ventures. About 25 per cent of the students did not sit for placements this year in IIT-B as they are likely to take the entrepreneurial route.
·         In IIT-Madras, too, there is a 20 to 25 per cent growth in the number of students floating their own ventures.
·         India has about 40 million small and medium businesses (SMBs) of which only around 500,000 are online. Once these rest of the SMBs comes into online business there would be stupendous growth in Revenues and Profitability of these units.
The Number Game Plan
·         Today The Institute of Chartered Accountants have has quite literally liberalized the passing out percentage to such an extent that today more than 30% students pass out every six months as qualified chartered accountants.

·         More than one lakh students join the chartered accountancy course every year with 45 to 50 per cent of them being girls. Last year as per news print data in Hindu Business line ICAI has around 2.10 lakh members at present.

·         Till February 2011 there were 83,664 practicing chartered accountants and the new chartered accounts are now joining jobs rather than going for practices since the later segment have become stagnant due to lack of opportunity. Also setting up a practicing firm needs an office space and the real estate cost have gone up substantially over the last couple of years.

Now current income condition of Chartered Accountants:

·         The return filing fees in 1990 was Rs1,500 and even now a CA cannot charge more than Rs2,000. The purchasing power of Rs1,500-Rs2,000 was far greater in 1990 whereas in 2013 it does not pay for a dinner for a family of four at a decent restaurant. The same is true for VAT.

·         The assessment proceedings have greatly reduced. In any case the same pattern. It was great value to charge Rs2,000 per hour in 1990 and we cannot increase the same by inflation rate. If Rs2,000 of 1990 has become Rs20,000 in value in 2013 Members (Chartered Accountants) cannot charge Rs20,000 per hour. 

·         A similar pattern follows for audit fees and certification fees. With much greater risk and responsibility thrown onto the auditors, the clients hate to increase fees. With so many CAs flooding the market, they are developing a rubber stamp culture where CA shopping is done to see who certifies at a lower rate—something like the notaries who run after you outside every court for getting the job done through them.
·         The articled clerks demand nothing less than Rs.5,000 per month, some of them protesting deduction of profession tax, which is a legal obligation on the payer! Cost of communication, power, systems, everything has gone up—but the fees remain fixed to 1990 levels.
·         Today a good fresher CA gets a CTC of Rs.4 lakh to Rs.6 lakh (these are among the lucky few) and a CA with 20 years experience in practice is not far off from that figure of income. This leaves quite a bitter taste in the mouth.
·         Clients of the CA do not like an increase in fees, traditional practice is getting redundant and does not have value—in fact it is losing monetary value.
Why Cost Accountants and Cost Accounting are Not required….Analysis……
I hope you have read the above statistics and now according to the New Companies Bill 2013 many new Single Owner Based Private Companies would be formed.  These new companies would be classified as Small and Medium Enterprise and their start up business profits, Turnover would be less than Rs.100cr even their Product Turnover would be Less than Rs.100cr. Now if Cost Accountants work for these organizations and does Cost management and Cost Audit Record Rules needs to adopt then Chartered Accountants would not find any space here. Currently Chartered Accountants are struggling with their growing Member base and their incomes are dropping. Hence If the ‘Current New Draft Guideline is being Established’ then   Chartered Accountants would find substantial business opportunities in the coming years. Now as per the current statistics which says that Entrepreneurship comes under Corporate Social Responsibility then the number of current SME which is 26 million would double in the next 5 years hence there will be huge opportunity for the Chartered Accountants to survive by Killing Cost Audit and Cost Records and Cost Accountants. With the Blessings of the New Companies Bill Chartered Accountants would find many new start up firms to increase their earnings. The Huge Final Passed Chartered Accountants numbers would find Earnings by Removing  Cost Audit and Records from SME segment.

The Slab for Cost Audit have been hiked so that Chartered Accountants  professional gets some space to breathe and many industries have been abolished since Small and Medium Segment caters to many industries. The list below will speak for the rest where you can find what benefit goes to Chartered Accountants by reducing the number of industries under the Cost Audit. Also note that a single product of Rs.100 cr in this segment is a far distance game hence Chartered Accountants are the biggest benefactors
In my next article I will come up with the Huge Segment Definition and Industrial landscape of SME in India and why Cost Accountants are required.

SALARY HIKE.....IMPROVISE EMPLOYEE CULTURE

Once again the phase of salary hike has come for this financial year. This is one of the key tools of employee motivation. Reviews and internal meetings are the common matters being held at each office. Few will be happy and few will lookout for the change in job in search of salary hike or better position. Salary hike is also being used to retain the talent within an organization. Well this is a wrong tool being utilized over the years by the companies.  Often it is being found that after salary hikes and reviews the satisfied employee’s lookout for an change in their jobs despite of everything in a positive. Most of the employees blame is being thrusted on the organization and its policies after the review and salary hikes being given. I have often heard that employees complain about the review process and most of reviews are biased ones. I don’t completely deny the same since still today we have organization where the heads of the employees are faced towards the boss whereas the ass is faced towards the customers. Hike of salary is an expectation of every employee but that expectation might not meet the objective of the organization.

The management science must understand and incorporate within their process that entrepreneurial based organization would be the survivors in the coming enhanced globalised economic trades. As the strategic management has taken renewed shape over the last couple of years and complexity of the business process have increased to new heights entrepreneurial based organization should be the survivors of any recession from diverse geographic. Now if the organization culture is entrepreneurial then the employees of the organization would be focused towards the same. In this type of culture we find that an organization gets an open minded employee segment where strategies and products come in a beeline. One of the biggest advantages of working in this type of organizations is that employees are in a constant period of Knowledge and education up- gradation. This constant process leads to an improvement in the employees’ quality which finally leads free political, unbiased review process and more focused towards the company’s performance.

If the organization changes its culture irrespective changing its objectives but changing the process of achieving the same then the employees  of the organization are also  motivated accordingly. HUL, Infosys, ICICI Bank is few of the examples where organization culture is based upon the improvement of the employees in terms of education and knowledge. We must not forget that these companies have not only created well class professionals but also these professionals are working in many organizations driving the growth of those organizations. Performance driven systems are being taken to be the best way for development of an organization. I would like to accentuate here that performance driven should not only be the key factor for employee motivation. In Indian context political biased performances are always mixed with performance since the performance is not dependent on a particular employee and team work is required. Often in my research I have found that team leader is often being apprehended as the one who will be sole take away of the credit of performance. Moreover team worker would focus more on pleasing the team leader and in this process the objective of an organization is being achieved. This is the reason why an equal opportunity of talent upgrading needs to be given where the performance and the bureaucratic mind set is being annihilated.

When an organization changes its culture then salary hikes can happen twice in a year since entrepreneurial mindset have been developed and this process leads to an organization to perform better to achieve its objectives. Today’s organizations are focusing on improving the responsibility levels of the employees. This being developed by giving them the responsibility of their departments followed with opening the minds of the employees.IBM was able to create its own computers without affecting its core business where as cannon developed its product range keeping intact its brand image. All these companies created best of the product and transformation of their brands through employees with the help of improving their productivity. In my previous articles I have written that Balanced Score is a dangerous tool to develop the culture and productivity of an organization. The same can be applied for employee salary hike and review process. Salary hike should not be the alone factor to retain employees within an organization.  If the value of an employee is being increased then the employee motivation and review becomes more easier and more comfortable for both the sides (employee as well as organizations)

Annihilate the bureaucratic and diplomatic nature within an organization. Review the process and then review the employees.

Sunday, February 2, 2014

Cost Accountants and Cost Records are not required....Why?

We are the guards of the Indian economy and we keep a check over the manipulative trade practices.Cost Accountants and Cost accounting profession is neglected. Well injustice to our profession was happening to our profession for more than a decade.  There are many reasons for which our profession is being neglected and downgraded.  We Cost Accountants work closely with the government and providing many useful reports which needs no introduction.  Our various cost accounting reports are being used by the government to design their Budgets and Planned expenditures. Then why Cost Accountants and Cost Accounting does is being neglected.  We are neglected since we are the ones who protect the Indian economy from any scam. Currently we are again trying to prove the benefits of the cost accounting records and cost accountants to the society. We are not recognized in the Indian Taxation act in various segments too. Well the anwere to these are interlinked with the various segments of this article. In this article I have tried to depict a part of the reason behind why we are again fighting for our identity.

The rising Non Performing Assets and story behind it….
 Currently you must be aware that Indian companies are facing the heat of slow down and due to these debt levels of the companies have swelled. Finally the destination of these debts is now the Non performing Assets of the Banks have swelled. Statistics of the Gross NPAs as on September 30, 2013 stood at Rs 2,29,007 crore, 27 per cent higher as compared to Rs 1,79,891 crore as of March 31, 2013 for 40 listed banks, Out of the total forty listed banks, fourteen banks have reported more than 50% jump in net NPAs during these six months. Now Non Performing Assets means that companies are unable to pay back the money to the Banks. These funds are public money which has been collected from the common people through taxes (indirect as well direct taxes). As a percentage of total loans, nonperforming assets at Indian banks climbed to 4.2% in September, up from 2.4% in 2009, according to the latest data available from India's central bank. When the NPA happens the money is bad debt which cannot be recovered. This money gets added up to the government liabilities books and hence in order to recover this money again the Government hikes taxes through budgets and non budget policies  which finally lead to increase in inflation. Now what are the pains of inflation is quite well known to everyone hence I don’t need to explain any more. According to ASSOCHAM there are many other causes which are also responsible for accumulation of NPAs like faulty credit management, lack of professionalism in the workforce, unscientific repayment schedule, mis-utilisation of loans by borrower, lack of timely legal solution to cases, political interference at local levels and waiver of loans by government. Now if cost accountants and their records are abolished then calculate the benefits and the owners  of the benefits.

Cost Accounting reports helps to Unmask Cost manipulation..
Now the question comes why cost accountants are not required and even if they are required where they fit in?. If cost accountants come then their cost report would help to unmask the real reasons behind this NPA. Most of the money has been utilized to pay exorbitant salaries of the corporate honcho’s. We all know that profitability have declined of the corporate India but at the same time cost have also increased. If the cost of production data is being analyzed we will witness that extensive price and cost manipulation has been done.  

Moreover the cost accounting records helps the government to access the raw materials which are imported and in accordance to that develop the industries within India related to those imported raw materials and also design the taxation of indirect taxes on those product so that import of those materials don’t affect the balance trade of Indian economy. Now if cost accountants and their reports are scrapped then it would be easy for the corporate to manipulate the numbers and increase the prices and make windfall profit. Cost records restrict and controls these manipulative practices. If cost accounting records are removed then please calculate the immense profitability these companies are going to make. Also calculate the immense pressure the common people will face from manipulative price increases which will damage the economic growth of India as well as wealth of the common people. In short the common people would be squeezed. Now if Cost Accountants are included in banking system then it would help the RBI to design the road map for managing these NPA. But Cost Accountants were never included in Banking segment neither they are recognized in the Indian taxation Acts.
Cost Accounting records would help the government to keep a check over the Inflation and manipulative trade practices of the corporate. This is reason why cost accountants and cost accounting records are not required. Cost records if abolished would help to make huge import of cheap goods which will kill the domestic industry but will make a windfall gain for the importers.

Quick Glance at the NPA numbers…
If one looks at the impaired assets ratio, which also takes into account restructured advances and write-offs, then the asset quality is worse for the non-priority sector. The impaired assets ratio for the priority sector is about 9%, while for the non-priority sectors, it is close to 13%.The largest beneficiaries of these largesse from lenders have been big firms. About 91% of total restructured loans on 31 March was accounted by large and medium industries. Thus, about 14% of large and medium industry loans have been recast compared with 5.8% of overall bank loans. The deterioration in asset quality is the highest for the industries segment, and within it large and medium enterprises, a segment which accounts for nearly half of the bank credit. According to ASSOCHAM Restructured accounts have grown at a compounded annual growth rate of 47.86 per cent in public sector banks. The corresponding figures for private sector and foreign banks are 8.12 per cent and 25.48 per cent respectively. Net non-performing assets (NPAs) or bad loans of 40 listed banks jumped by 38% or around Rs. 35424 crore in the first six months of current financial year, according to a study done by NPAsource.com, a portal which focuses on resolution of stressed assets. Net NPAs of these banks stood at Rs. 93109 crore as on March 31 this year. Top public sector banks like State Bank of India (SBI), Bank of Baroda, Punjab National Bank, Central Bank, IDBI Bank and Union Bank have all reported more than 30% rise in net NPAs during this period. HDFC Bank and SBI were among the large banks that recorded a sharp increase (in percentage terms) in net NPAs. Out of the total 40 listed banks, 14 banks have reported more than 50% jump in net NPAs during these six months.


Well I hope I was able to justify myself with the rationales behind why cost accountants are neglected and why cost records are not required.

Saturday, February 1, 2014

Failures of Government to Recognize Cost Records value proposition:Series 1

Over the last decade we have been depicting the true picture about the requirements of Cost Accounting and Cost Records which would help the government, shareholders and overall which will improve the corporate governance segment of the Indian corporate. We have explained many times that how Cost Audit and Cost Records would help the Indian government to improve its economy. Well again today we are trying to explain the same stuff here too. But one of the most surprising things is that we are exploring those areas which were ruled by Chartered Accountants. Now when we have explored the path they want to name the path on their own name.  

Indian health care segment is very much scattered in term of the services. Government hospitals have juts managed to improvise and that too in the urban jungle whereas in the rural the situation is still under experimental phase. Some guidelines have been made to improvise the rural health care system but the public infrastructure remains glitch for development. On the other hand private hospitals made a stupendous growth in urban jungle through efficient resource management and cost management which finally lead to better pricing for the patients to use the service.  Here again we find that cost management has played the vicious cycle in the Indian health care segment to grow but the government hospitals failed to do so. This is mainly because the government has been taught only to pay subsidy and provide low cost facility without calculating the cost of the services. When the government found that they were not able to accommodate the rising cost the subsidy part dried away and it only became a Debate Topic for the Elections. In short government has failed to understand the implication of cost records for decision making. But the fallacy is this that Chartered Accountants were still their doing financial audit for these government hospitals. If cost records are of no use then why did not the financial audit reports help the government to improve the public health care system?

Examples and Failures of Government to Recognize Cost Records value proposition
Well how private sector hospitals made a stupendous growth within the same limits is the matter of concern. Limits I mean to say rising cost and accommodating the same within the price to the end user/patient. We must have heard about Dr.Devi Shetty the famous heart surgery who trimmed cost and through efficient resource management cut the price of artery-clearing coronary bypass surgery to 95,000 rupees ($1,555)—half of what it was 20 years ago. He wants to get it down to $800 within a decade. The same procedure costs $106,385 at Ohio’s Cleveland Clinic, according to data from the Centers for Medicare & Medicaid Services. Controlling costs is key in India, where more than two-thirds of the populace lives on less than $2 a day and 86 percent of health care is paid by individuals. Per capita health spending is less than $60 a year. Well financial accounting failed to develop this model.

Medical equipment cost have come down dramatically over the years due to efficient cost management. Their profitability have increased whereas their cost have come down is all due to efficient cost management. Poor costing systems have disastrous consequences. It is a well-known management axiom that what is not measured cannot be managed or improved. The public healthcare system went for a wrong path of cost management which included e-board cuts in expensive services, staff Compensation and head count. But imposing arbitrary spending limits on discrete components of care, or on specific line-item expense categories, achieves only marginal savings that often lead to higher total systems costs and poorer outcomes. When we complain about the service part of public health care system we should know the background for such ill behaviour from their end.

Benefits of No Cost Records
Poor cost measurement due to improper cost records has also led to huge cross-subsidies across services and products. Well I would like to remind here that cost accounting helps to create sales mix of product and services but government fails to understand the same. Now providers are generously reimbursed for some services and incur losses on others. These cross-subsidies introduce major distortions in the supply and efficiency of care. The inability to properly measure cost and compares cost with outcomes is at the root of the incentive problem in public healthcare system. This is reason why we prefer to opt for private hospitals and why private hospitals have been able to achieve stupendous growth. Well I remind you again here that financial audit was being executed by Chartered Accountants.

Financial accounting and Chartered Accountants were present in this sector since India got independence. Then why not the public health care system did not grew. Why better pricing, efficient resource planning were not implemented when the public health care system is struggling. If cost records are of no use then why did not the financial audit reports help the government to improve the public health care system? 

  © Blogger template 'Minimalist H' by Ourblogtemplates.com 2008

Back to TOP