Management Accountant April-2017

THE JOURNAL FOR CMAs
MANAGEMENT
THE
ACCOUNTANT
ISSN 0972-3528 April 2017 VOL 52 NO. 4 Pages - 124 100
MUNICIPALITY
PANCHAYATI RAJ AND
RURAL DEVELOPMENT
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA

(Statutory body under an Act of Parliament) www.icmai.in 1
www.icmai.in April 2017 l The Management Accountant 1
(STATUTORY BODY UNDER AN ACT OF PARLIAMENT)
EXAMINATION TIME TABLE & PROGRAMME – JUNE- 2017
FOUNDATION COURSE EXAMINATION
Day & Date Foundation Course Examination Syllabus-2012 Foundation Course Examination Syllabus-2016
Time 2.00 p.m. to 5.00 p.m. Time 2.00 p.m. to 5.00 p.m.
11th June, 2017 Fundamentals of Economics & Management Fundamentals of Economics & Management
Sunday
12th June, 2017 Fundamentals of Accounting Fundamentals of Accounting
Monday
13th June, 2017 Fundamentals of Laws & Ethics Fundamentals of Laws & Ethics
Tuesday
14th June, 2017 Fundamentals of Business Mathematics & Statistics Fundamentals of Business Mathematics & Statistics
Wednesday
Examination Fees
Inland Centres Rs. 1200/-

Foundation Course Examination
Overseas Centres US $ 60
1. The Foundation Examination will be conducted in Offline, descriptive (Pen & Paper) mode only. Each paper will be
of 100 marks and for 3 hours duration.
2. Application Forms for Foundation Examination can be filled up either through online or in offline mode.
3. The examination application form can also be downloaded from the Institute website www.icmai.in and the student may
apply in offline mode by attaching demand draft of requisite examination fees. Demand draft should be made in favour of
The Institute of Cost Accountants of India, payable at Kolkata. In case of overseas candidates, forms are available at
Institute’s Headquarters only on payment of $ 10 per form.
4. (a) Students can login to the website www.icmai.in and apply online through payment gateway by using Credit/Debit card
or Net banking
(b) Students can also pay their requisite fee through pay-fee module of IDBI Bank
5. Last date for receipt of Offline Examination Application Forms without late fees is 31st March, 2017 and with late fees of
Rs. 300/ is 10th April, 2017. In case of online Examination Application with payment gateway by using Credit/Debit Card
or Net banking, the late fees of Rs.300/-will be waived and the last date for application is 10th April, 2017.
6. Examination Centres: Adipur -Kachchh(Gujarat), Agartala, Agra, Ahmedabad, Akurdi, Allahabad, Asansol, Aurangabad,
Bangalore, Baroda, Berhampur(Ganjam), Bhilai, Bhilwara, Bhopal, Bewar City(Rajasthan), Bhubaneswar, Bilaspur,
Bokaro, Calicut, Chandigarh, Chennai, Coimbatore, Cuttack, Dehradun, Delhi, Dhanbad , Durgapur, Ernakulam,Erode,
Faridabad, Ghaziabad,Guntur,Guwahati, Haridwar,Hazaribagh, Howrah, Hyderabad, Indore, Jaipur, Jabalpur, Jalandhar,
Jammu, Jamshedpur, Jodhpur, Kalyan, Kannur, Kanpur, Kolhapur, Kolkata, Kota, Kottayam, Lucknow, Ludhiana,
Madurai, Mangalore, Mumbai, Mysore, Nagpur, Naihati, Nasik, Nellore, Neyveli, Noida, Palakkad, Panaji (Goa), Patiala,
Patna, Pondicherry,Port Blair, Pune, Raipur ,Rajahmundry, Ranchi,Rourkela, Salem, Sambalpur, Shillong, Siliguri,
Solapur, Srinagar, Surat, Thrissur, Tiruchirapalli,Tirunelveli, Trivandrum, Udaipur, Vapi, Vashi, Vellore, Vijayawada,
Vindhyanagar, Waltair and Overseas Centres at Bahrain, Dubai and Muscat.
7. A candidate who is completing all conditions for appearing the examination as per Regulation will only be allowed
to appear for examination.
8. Probable date of publication of result: 23rd August, 2017.
DR. D. P. NANDY
Director
(Examination)
* For any examination related query, please contact [email protected]
2 The Management Accountant l April 20172 www.icmai.in

The Institute of Cost
Accountants of India
PRESIDENT
CMA Manas Kumar Thakur THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
[email protected] (erstwhile The Institute of Cost and Works Accountants
VICE PRESIDENT of India) was first established in 1944 as a registered
CMA Sanjay Gupta company under the Companies Act with the objects of
[email protected]
promoting, regulating and developing the profession of
COUNCIL MEMBERS
Cost Accountancy.
CMA Amit Anand Apte, C MA Ashok Bhagawandas Nawal,
CMA Avijit Goswami, CMA Balwinder Singh, CMA Biswarup Basu, On 28 May 1959, the Institute was established by a
CMA H. Padmanabhan, CMA Dr. I. Ashok, special Act of Parliament, namely, the Cost and Works
CMA Niranjan Mishra, CMA Papa Rao Sunkara, CMA P. Raju Iyer, Accountants Act 1959 as a statutory professional body for
CMA Dr. P V S Jagan Mohan Rao, CMA P. V. Bhattad, the regulation of the profession of cost and management
CMA Vijender Sharma, Shri Ajai Das Mehrotra, Shri K.V.R. Murthy,
accountancy.
Shri Praveer Kumar, Prof. Surender Kumar, Shri Sushil Behl
It has since been continuously contributing to the
Secretary growth of the industrial and economic climate of the
CMA Kaushik Banerjee country.
[email protected] The Institute of Cost Accountants of India is the only
Sr. Director (Studies, Admin. & HR)
recognised statutory professional organisation and
CMA Arnab Chakraborty
[email protected], [email protected] licensing body in India specialising exclusively in Cost
Sr. Director (CAT & Admin) and Management Accountancy.
CMA L Gurumurthy
[email protected], [email protected]
Sr. Director (Technical)
CMA J K Budhiraja
[email protected] MISSION STATEMENT
Director (PD & CPD)
CMA S C Gupta
The CMA
[email protected] Professionals would
Director (Research & Journal) & Editor ethically drive enterprises globally
CMA Dr. Debaprosanna Nandy by creating value to stakeholders
[email protected] in the socio-economic context through
Director (Membership & Finance)
CMA A S Bagchi
competencies drawn from the integration of
[email protected], [email protected] strategy, management and accounting.
Director (Discipline) & Jt. Director (Advanced Studies)
CMA Rajendra Bose
[email protected], [email protected] VISION STATEMENT
Additional Director (IT)
Smt. Anita Singh The Institute of Cost Accountants of India
[email protected] would be the preferred source of
Joint Secretary & Head (International Affairs)
resources and professionals for the
CMA Nisha Dewan
[email protected], [email protected] financial leadership of
Joint Director (Infrastructure) enterprises globally.
CMA Kushal Sengupta
[email protected]
Joint Director (President’s & Vice President’s office)
CMA Tarun Kumar
[email protected] IDEALS THE INSTITUTE STANDS FOR
Joint Director (Internal Control) • to develop the Cost and Management Accountancy profession
CMA Dibbendu Roy • to develop the body of members and properly equip them for functions
[email protected]
• to ensure sound professional ethics
Editorial Office
CMA Bhawan, 4th Floor, 84, Harish Mukherjee Road, Kolkata-700 025 • to keep abreast of new developments
Tel: +91 33 2454-0086/0087/0184 , Fax: +91 33 2454-0063
Headquarters
CMA Bhawan, 12, Sudder Street, Kolkata 700016
Tel: +91 33 2252-1031/34/35 , Fax: +91 33 2252-7993/1026
Delhi Office
Behind every successful business decision,
CMA Bhawan, 3, Institutional Area, Lodi Road, New Delhi-110003 there is always a CMA
Tel: +91 11 24622156, 24618645 ,Fax: +91 11 4358-3642
WEBSITE
www.icmai.in
CONTENTS
APRIL 2017
April 2017 VOL 52 NO.4 100

A Study on
16 Local Bodies
Audit in India
20
Internal Audit
COVER STORY
System of the Gram

Panchayats in
West Bengal
INSIDE
24
Amplifying
Revenues in
Panchayat Raj
System
34
Role of Government
Sponsored Schemes-India's
Journey Towards Rural
Development
The Management Accountant, official organ of The Institute of Cost Accountants of India, established in 1944 (founder member of IFAC,
SAFA and CAPA)
EDITOR - CMA Dr. Debaprosanna Nandy
on behalf of The Institute of Cost Accountants of India, 12, Sudder Street, Kolkata - 700 016. e-mail: [email protected]
PRINTER & PUBLISHER - CMA Kaushik Banerjee
on behalf of The Institute of Cost Accountants of India, 12, Sudder Street, Kolkata - 700 016
PRINTED BY- Swapna Printing Works Private Ltd. at 52, Raja Rammohan Roy Sarani, Kolkata - 700 009 on behalf of The Institute of Cost
Accountants of India, 12, Sudder Street, Kolkata - 700 016
CHAIRMAN
RESEARCH, JOURNAL & IT COMMITTEE - CMA Avijit Goswami
EDITORIAL OFFICE - CMA Bhawan, 4th Floor, 84, Harish Mukherjee Road, Kolkata -700 025
Tel: +91 33 2454-0086/0087/0184, Fax: +91 33 2454-0063
The Institute of Cost Accountants of India is the owner of all the written and visual contents in this journal. Permission is necessary to re-use any
content and graphics for any purpose.
DISCLAIMER - The views expressed by the authors are personal and do not necessarily represent the views of the Institute and therefore
should not be attributed to it.

INTERVIEW REAL ESTATE
Shri Prabir Kumar Mukhopadhyay Real Estate Industry - Current Scenario

Member (Finance), Damodar Valley Corporation 40 Overview, Financial Modelling, ERP Enabled
Cost Information 44
DEMONETISATION COST AUDIT
Demonetisation & its impact on Indian Economy 48 The Great Indian Experiment – Justification
for Introduction and Continuation1 52
INTERNAL
BANKING CONTROL
Truncated Boards of Public Sector Banks 60 Regulatory Requirements and Relevance in

Relationship Marketing in Banks 96 Audit of Cost Records 66
GST
GST Audit: Desirable by all stakeholders

“Are you ready for GST Audit” 78
Editorial 06
President's Communique 08
ICAI-CMA Snapshots 13
Tax Updates 108
Institute News 112
From the Research Desk 120
CMA Career Awareness Programme 121
The Management Accountant Journal is Indexed

and Listed at: Index Copernicus and J-gate
Global Impact and Quality factor (2015):0.563

EDITORIAL
Greetings!!! As a result of economic development in India,
urbanization is proceeding at a very rapid rate. Cities
and towns contribute to more than 60% of the GDP,
Panchayat and Municipality are the generic terms for so one can understand the strong correlation between
the governing body at the local level. Both exist as urbanization and economic development. So it is
three tier systems – at the lower, intermediate and imperative to develop an efficient urban or municipal
upper levels. The 73rd Constitutional Amendment government. The conceptualization of Smart City,
Act provides for a Gram Sabha as the foundation of varies from city to city and country to country,
the Panchayati Raj system. It is essentially a village depending on the level of development, willingness
assembly consisting of all the registered voters in the to change and reform, resources and aspirations of
area of the Panchayat. The state has the power to the city residents. A smart city would have a different
determine what kind of powers it can exercise, and connotation in India than, say, Europe. Even in India,
what functions it has to perform at the village level. there is no one way of defining a smart city. Some
Similar to the Panchayati Raj system, the Nagar Palika definitional boundaries are required to guide cities in
Act or the Municipalities Act, 1992 set up through the the Mission. In the imagination of any city dweller in
74th Amendment Act also provides for a three tier India, the picture of a smart city contains a wish list
municipal system of infrastructure and services that describes his or
namely: her level of aspiration. To provide for the aspirations
1. Nagar Panchayat for a transitional area between and needs of the citizens, urban planners ideally aim
a rural and urban area. at developing the entire urban eco-system, which
2. Municipal Council for a small urban area. is represented by the four pillars of comprehensive
3. Municipal Corporation for a large urban area. development-institutional, physical, social and
economic infrastructure. This can be a long term
Municipalities represent urban local self-government. goal and cities can work towards developing such
Most of the provisions of the two acts are parallel, comprehensive infrastructure incrementally, adding on
differing only in the fact that they are being applied to layers of ‘smartness’.
either a Panchayat or a Municipality respectively. Each
Gram Sabha is the meeting of a particular constituency The Government of India has launched the Atal Mission
called ward. Each ward has a representative chosen for Rejuvenation and Urban Transformation (AMRUT)
from among the people themselves by direct election. with the aim of providing basic civic amenities like
The chairperson of the Panchayat or Municipality at water supply, sewerage, urban transport, parks as to
the intermediate and district level are elected from improve the quality of life for all, especially the poor
among these representatives at the immediately lower and the disadvantaged. The focus of the Mission
level by indirect election. is on infrastructure creation that has a direct link
to provision of better services to the citizens. The
Municipal governance in India has been in existence purpose of “AMRUT” mission is to (i) ensure that every
since the year 1687 with the formation of Madras household has access to a tap with assured supply
Municipal Corporation and then Calcutta and Bombay of water and a sewerage connection (ii) increase
Municipal Corporation in 1726. In early part of the the amenity value of cities by developing greenery
nineteenth century, almost all towns in India had and well maintained open spaces e.g. parks and (iii)
experienced some form of municipal governance. In reduce pollution by switching to public transport or
1882, the then Viceroy of India, Lord Ripon's resolution constructing facilities for non-motorized transport.
of local self-government laid the democratic forms of
municipal governance in India. In 1919, a Government On the other side, it is noteworthy that rural
of India Act incorporated the need of the resolution development implies both the economic betterment
and the powers of democratically elected government of people as well as greater social transformation. In
were formulated. In 1935, another Government of India order to provide the rural people with better prospects
Act brought local government under the purview of the for economic development, increased participation
state or provincial government and specific powers of people in the rural development programmes,
were given. decentralization of planning, better enforcement of
land reforms and greater access to credit are needed.
The purpose of municipal governance and strategic
urban planning in a country is to create effective, This issue presents a good number of articles on the
responsive, democratic, transparent, accountable cover story theme ‘Municipality, Panchayati Raj and
local governance framework organised according to a Rural Development’ by distinguished experts and
rational structure that promotes responsiveness and authors. We look forward to constructive feedback from
accountability; to provide responsive policy guidance our readers on the articles and overall development of
and assistance to sub-national entities; to strengthen the journal. Please send your mails at [email protected].
the legal, fiscal, economic and service delivery We thank all the contributors to this important issue
functions of municipalities and to foster greater citizen and hope our readers enjoy the articles.
participation in the governance of local bodies.

-: PAPERS INVITED :-
Cover stories on the topics given below are invited for
‘The Management Accountant’ for the four forthcoming months.
e
e
em
Activity Based Costing & its applications
em
Global Economic Sustainability
Th
Th
May 2017 June 2017

Subtopics
Subtopics
 Applications in:
 Railways
 Aviation  Prospective Cost Competitiveness
 Ports  Sustainable Cost Leadership strategies
 SME sector
 New regulatory frameworks and smart policies
 Services sector
 Strengthening International Cooperation
 Global practices
 Global trends and challenges to sustainable development
 Success and failure of Activity Based techniques
 Time-driven Activity Based Costing
 Government initiatives for business success
 Activity Based Planning and Budgeting  Business Models for Sustainability
 Activity Based Management  Role of CMAs in Economic sustainability
e
e
Competition Act:
em
em
Ease of Doing Business in India

Th
Th
Key Driver of Competitiveness

July 2017
August 2017
Subtopics Subtopics
 Business regulations in India  The MRTP Act: Predecessor of the Competition Act (2002)
 Entrepreneurship & Skill development  Consumer Protection Act v/s Competition Act
 Business environment  Competition Advocacy
 Make in India & GOI initiatives  Cartelization: Recent Trends
 Benchmarking & Economy rankings  Corporate Leniency and Corporate Efficacy
 Role of World Bank, ADB and other International agencies  Per se Illegality in respect of Anti-competitive Agreements
 Role of CMAs  Impact of Competition Act on Cross-border Mergers
 Pricing Competition - Role of CMAs
The above subtopics are only suggestive and hence the articles may not be limited to them only.
Articles on the above topics are invited from readers and authors along with scanned copies of their recent passport-size
photograph and scanned copy of declaration stating that the articles are their own original and have not been considered for
publication anywhere else. Please send your articles by e-mail to [email protected] latest by the 1st of the previous month.
Directorate of Research & Journal

The Institute of Cost Accountants of India (Statutory body under an Act of Parliament)
CMA Bhawan, 4th Floor, 84 Harish Mukherjee Road, Kolkata - 700 025, India
Board: +91-33- 2454 0086 / 87 / 0184, Tel-Fax: +91-33- 2454 0063
www.icmai.in

PRESIDENT’S COMMUNIQUÉ
Success is no accident. It is hard work, per-

severance, learning, studying, sacrifice and
most of all, love of what you are doing or
learning to do.
-- Pele
Patton Group. Swami Kripakarananda of Ramakrishna Mission

SevaPratishthan rendered his thought provoking deliberations
in the motivational session. Dr. Gaurav Chandra Dutt, IPS,
Mr. VenguswamyRamaswamy, Global Head, TCS iON, Mr.
VibhorTandon, AVP, MCX, CMA A.B. Nawal, Council Member,
CMA Aditi Dasgupta, Deputy Director of the Institute were among
CMA MANAS KUMAR THAKUR the panellists during motivational session which inspired the
President audience for their betterment in life in near future.
The Institute of Cost Accountants of India In my address to students I reminded them about their duties
and responsibilitie towards society for sustainable development.
CMA P.V.Bhattad, Past President, CMA AvijitGoswami, CMA
My Dear Professional Colleagues, H.Padmanabhan, CMA P Raju Iyer, CMA Niranjan Mishra,
Namaskar. CMA BiswarupBasu, CMA Dr. I Ashok, CMA Papa Rao Sunkara,
CMA A.B. Nawal, Council Members, Shri Sushil Behl and Shri
National Students Convocation Praveer Kumar, Government Nominees of the Institute, CMA
I am pleased to inform that the Institute organized its National BibekannadaMukhopadhyay, Chairman of EIRC, CMA V. Murali,
Students Convocation – 2017 at Eastern Zonal Cultural Centre Chairman of SIRC, CMA Kaushik Banerjee, Secretary addressed
(EZCC), Kolkata on March 30, 2017. Shri KeshariNathTripathi, during the Convocation and felicitated them with prizes, rank
Hon’ble Governor of West Bengal graced the convocation as the certificates, medals.
Chief Guest. He released the convocation souvenir and Institute During this auspicious program, the Institute entered into
profile in the inaugural session. While addressing the vast four path-breaking MoUs with: Tata Consultancy Services (TCS),
gathering,the Chief Guest expressed his happiness to award the Times Centre for Learning Ltd. (TCLL), MaulanaAbulKalam
professional students and also appreciated the Institute’s role in Azad University of Technology (MAKAUT) and Bhawanipur
pursuing its vision of cost competitiveness, cost management, Education Society (BES) for collaborative research programs,
efficient use of resources and structured approach to cost short-term professional courses, career awareness programs,
accounting as the key drivers of the profession. skill development programs etc. and to operate in various areas
The event was also graced by Prof.Dhrubajyoti Chattopadhyay, of professional education for the benefits of students and the
Vice Chancellor, Amity University, Kolkata Campus, Prof.Basab society at large.
Chaudhuri, Vice Chancellor, West Bengal State University, The convocation ended with Career Orientation programme
Prof.Saikat Maitra, Vice Chancellor, MaulanaAbulKalam Azad for the professionally qualified students to assist the future
University of Technology, West Bengal, Mr. Sanjay Budhia - MD, professionals to scale up new heights of success and growth.

The Convocation witnessed an august participation of eminent on a topic which has a significant role in economic development
personalities including academicians, corporate, professionals process of the country and also framing a platform for exchange
and huge numbers of students cutting across the length and of thought and ideas to forge a new path which will be more
breadth of the country. balanced in terms of time, outcome and sustainability. CMA
National Conference on Sustainable Infrastructure Sanjay Gupta, Vice-President of the Institute of Cost Accountants
I am pleased to inform that, the Institute has organised a One of India highly appreciated the dynamic steps taken by the
Day National Conference on “Sustainable Infrastructure” at Present Government in transforming the Indian economy and
Hotel Taj Mansingh, New Delhi on 23rdMarch 2017. The objective building a New India. He reconfirmed the dedication of the CMA
of the seminar was to make people aware of Sustainable profession towards to provide all possible support in terms of
Infrastructure and to explore the role of CMAs in development of expertise and act as catalyst in the growth process.
this important growth engine of economy. The deliberations were The high quality deliberations were hugely enjoyed by the
focused around the significance of Power, Railways, Ports,Civil participants who were gathered in large numbers to attend the
Aviation, Highways and Petroleum as means of Sustainable conference. The eminent speakers from renowned organisations
Infrastructure. The Conference was inaugurated by the Chief of public and private sector reiterated that Good Infrastructure
Guest Shri Suresh Prabhakar Prabhu, Hon’ble Union Minister drives economic growth by facilitating manufacturing, services
for Railways while Shri Arjun Ram Meghwal, Hon’ble Minister of and trade by means of good roads, ports, power plants,
State for Finance and Corporate Affairs was the Guest of Honor. transportation etc. In order to achieve good development in
Shri Piyush Goyal, Hon’ble Union Minister of State (IC) of New the times of diminishing natural resources, infrastructure needs
& Renewable Energy, Power and Coal addressed the participants to be sustainable. Sustainable infrastructure enables sound
through video conference. economic development and enhances quality of life, increases
Shri Suresh Prabhu appreciated the theme of the conference positive impacts, helps protect our vital natural resources and
and emphasized the need for Infrastructure development which environment, and promotes a more effective and efficient use of
is sustainable.He informed that the budgeted provision of financial resources.
the current year for development fund of Indian Railways has MoU with Ravenshaw University, Odisha
been kept all time high to the extent of Rs 3.50 lakh crores. He I wish to inform that, in order to encourage skill development
further elaborated that his ministry made a careful planning for the Institute and Ravenshaw University signed one MOU on
expansion of 3000 km rail lines per year to meet the challenges 25th March 2017. The idea is to build capacity of both Institutes
enhancing the passenger services and freight carrying ability so in the areas of conducting jointly Skill Development Program,
as to empowering the growth engine to take the responsibility Entrepreneurship Development Program, UGC Sponsor/
of providing major logistic support to economic activities. He CSR Fund Sponsored Program, Preparing Project Templates/
appreciated the role of the Institute and said that signing of the Research Bulletin on various Service sectors, Joint Reassert
MoU with the Institute is expected to go a long way in providing Activities,Facilitating Students to Pursue CMA Course during
necessary inputs to Indian Railways in terms of Costing of pursuing their college Course and many more initiatives for the
Railway Services and implementation of the Cost Management development of Students and economy of the State of Odisha.
though Performance Costing. To commemorate the occasion one Joint International seminar
Shri Piyush Goyal mentioned that the energy sector including was organized on the theme “Changing Paradigms of IFRS
power, Coal &Solar energy have achieved a remarkable growth and Indian Adjustments” at the Auditorium of Commerce
process forwarding the eco-friendly concept. Hon’ble Prime Departments, Ravenshaw University, Odisha. Around 300
Minister of India has set a target of achieving 1 lakh MW under Participants including HOD Commerce/Professors/Faculties
Solar mission by 2022.Under this mission Ministry is expected to from different Colleges and Universities, students of Ravenshaw
achievethe target of 20000 MW by next year. University and CMAs participated in the Program.
Shri Arjun Ram Meghwalexplained how India has taken MoU with Fakir Mohan University, Odisha and Odisha
lead to be most happening country in the world and need for Commerce Association
development of infrastructure cannot be overemphasized. The I wish to inform that aMemorandum of Understanding
way the pace of all round development for New India is set as (MOU) was signed between Fakir Mohan University and the
envisaged by the visionary Prime Minister of India is exemplary. Institute on 26th March 2017.On the same day another MOU was
He indicated that GOI has kept a budget provision of Rs 3.97 lakh signed between Odisha Commerce Association &the Institute
crores for the year 2017-18 for infrastructure development in the to encourage conducting joint Skill Development Programs,
country. He opined that it would display a remarkable height of Entrepreneurship Development Programme, UGC Sponsor/CSR
growth before the world by the year 2022, the Platinum Jubilee Fund Sponsored Program, Project Templates/Research Bulletin,
Year of Indian Independence. Facilitate Students to Pursue CMA Course with their college
In my presidential address, I expressed happiness that the course through opening of CMA Support Centres/Extension
Institute could take a constructive role in organizing a conference Centres in the premises of university and any other suggested

colleges campus. To mark this occasion one national seminar Gupta, Commissioner, GST, CBEC for winning Presidential award
was jointly organized by the Institute and FM University on the at New Delhi. I also felicitated Shri Khaled Anwar, Additional
theme “GST-An Overview and its Practical Aspects”. Around Commissioner, West Bengal on winning Presidential award for
300 Participants which includes HOD Commerce/Professors/ GST on 14th March 2017.
Faculties from different Colleges and Universities, students of Initiatives by various departments of the Institute
FM University and CMAs attended the seminar. Continuing Professional Development
MoU with Techno India Group (TIG)  I am pleased to inform that the CPD Department conducted a
I am pleased to inform that, to give a boost to the engineering webinar on ‘Maharashtra Co-operative Societies Act 1960
students and those studying cost accounting, the Institute and and Rules’ on 11thMarch 2017 which was very well received
the Techno India Group (TIG) have signed a Memorandum of by the members. For those who could not attend the event,
Understanding (MOU). I hope that the collaboration of academics a recorded webinar is now available on Institute’s website
and extra-curricular programs based on principles of equality and under Featured Links.
honesty in this age of digitisation will prepare the youngsters for  A half day program on “Capital Market and SEBI
revolutionary ‘Digital India’ initiative. Regulations”was organised on 16thMarch 2017 at CMA
Placement Month Bhawan, New Delhi. CMA PVS Jagan Mohan Rao, CCM was
As informed through my previous communique the Institute is the Key speaker of the program.
organising campus placement program for the CMAs qualified in  PHD Chamber of Commerce & Industry in association with the
December 2016 term examination.Placement Directorate of the Institute conducted a seminar on “Business Responsibility
Institutehas scheduled its campus placement program during Reporting – A journey towards Effective Governance” on
the month of April 2017 across India. I would like to thank the 22nd March 2017 at New Delhi.
industry partners for collaborating with the Institute over the  The Department played major role in organising the National
years. I extend a warm welcome to all corporate for the campus Conference on “Sustainable Infrastructure 2017” on
placement in the current academic year. Our target is 100% 23rdMarch 2017, at The Taj Mahal Hotel, New Delhi.
placement and for this I once again remind all the members, I sincerely appreciate our Regional Councils and Chapters for
especially those who are in service, to help the Institute for organizing more than 70 programs, seminars and discussions
placing the students appropriately. I wish all the best to the on the topics of professional relevance and importance for the
students who are appearing for the campus placement. members such as, Union Budget, GST, Demonetization-Effect
Special drive for Young CMAs to build their bright on Economy, IND AS and INSOLVENCY & BANKRUPTCY CODE,
Professional Career Foreign Trade Policy, Internal Audit, Emerging e-commerce so on.
To groom/help the Young qualified CMAs for their bright International Affairs
professional career, the Institute is organising a unique special  I wish to inform that the Institute was represented in a
drive. The first such program will be held on 4th April 2017 at meeting called by Ministry of Corporate Affairs on 8thMarch
Kolkata where around 60such CMAs will participate and a 2017 with a view to develop a short-term and long term
panel of the Institute officials headed by me will be listening action plan for tapping the potential to provide services in
to their problems one by one. The aim is to provide solution to the Accounts and Finance Sector to access overseas markets.
the problems / clearing the impediments these CMAs facing in  CMA Dr.PVS Jagan Mohan Rao, Council Member and
achieving their goal. We will try to resolve the issues relating Member of the IFAC-PAIB committee along with CMA Sanjay
to personality development, communication skills, technical Gupta, Vice President and Technical Adviser to Member,
skills etc. during the program. After analysing the results of the IFAC-PAIB attended the meeting of Professional Accountants
program, the same will be repeated at other centres also. We in Business Committee of International Federation of
have also planned to organise the programs on same lines for Accountants (PAIBC-IFAC) during 28th-30th March 2017 at
the practicing CMAs, who have not been successful in setting up New York, USA.
good practice due to various reasons.  I am pleased to inform you that the Committee has planned
Vasant Utsav at HQ various activities to connect with the CMA professionals
I am pleased to inform that the ‘Vasant Utsav’was organized across the globe to propagate the importance of Cost and
by the Institute on 13thMarch 2017 at J.N. Bose Auditorium, Management Accounting structure. In continuation to
Headquarters where CMA Biswarup Basu, Council Member, CMA the efforts to connect with the members, the Committee
Harijiban Banerjee, Past President and officials of the Institute conducted a Webinar on “International Transfer Pricing-Role
graced the occasion along with all other office staff and a brief of CMAs” presented by CMA (Dr.) Ashish P Thatte on 31st
cultural programme was also arranged to commemorate the March 2017. It was well received by the members in India
occasion. and abroad.
Felicitation Membership Department:
I am pleased to inform you that I felicitated Shri Upender I convey my heartiest congratulations and welcome all the new

418 Associate members who were granted membership and all the Kolkata Metro Rail Corporation were the eminent dignitaries
76 members who were advanced to Fellow membership. I again who graced the occasion. CMA A.B. Nawal, Council Member
call upon and request all members to clear their membership fees of the Institute, CMA MrityunjayAcharjee, Vice President
for the new financial year. I also request all members in practice (Internal Audit & Taxation), Balmer Lawrie & Co Ltd, Shri Ajay
who have not yet made application for renewal of their Certificate Agarwal, Deputy Manager, Indirect Tax, Deloitte Haskins &
of Practice to immediately apply for the same. The Institute has Sells LLP, Kolkata, CA VivekJalan, Partner, Member Indirect
decided that those who have not yet earned minimum mandatory Tax Committee, Visiting Faculty for Indirect Tax, The Bengal
CEP credit hours can cover the shortfall by attending programmes Chamber of Commerce & Industry, Shri Narayan Guriya, Jt
latest by May 15, 2017. Commissioner, Commercial Tax, West Bengal were among the
Professional Development Department eminent resource persons enlightening the participants with
 Representation with Government, PSUs, Banks and Other their deliberations. CMA Sanjay Gupta, Vice President along
Organizations: with the officials of the Institute attended the valedictory
On representations made by the PD Directorate, National session of the workshop. The four day workshop provided
Housing Bank (NHB) and Jodhpur VidyutVitran Nigam Ltd. participants with sound knowledge on GST and impact of
have included Cost Accountants in EOIs. Further, the eminent GST on Railway Accounting & Taxation.
organizations like Indian Rare Earths Limited, Punjab State  Focused Group Discussion with Competition Commission
Power Corporation Limited, National Health Mission, Uttar of India (CCI)
Pradesh, Kerala Medical Services Corporation Limited, It is a pleasure to inform that Competition Commission of
Puducherry Tourism Development Corporation Limited India (CCI) and the Institute signed a path-breaking MOU to
(PTDC), Madhya Pradesh PoorvKshetraVidyutVitaran Co. develop a competition advocacy strategy. For the first time in
Ltd., Madhya Pradesh PaschimKshetraVidyutVitran Co. Ltd., Kolkata, a Focused Group Discussion (FGD) was organized on
Orissa State Health & Family Welfare Society and Municipal 16th March 2017 at EIRC Auditorium of the Institute, mainly to
Council of Buldana, Maharashtra and Jammu And Kashmir emphasize on competition advocacy and spread awareness
State Power Development Corporation Limited recognized about Competition Act. Shri Yogesh K. Dubey, Dy. Director
CMA profession in their Tenders/EOIs in the month of (Eco.), Advocacy Division, Competition Commission of India,
March. New Delhi, CMA Pratap Kr. Chakravarty, a Professional
 Meeting with Smt. Nirmala Sitharaman and Management Consultant, CMA AvijitGoswami,
I am pleased to inform that CMA Amit AnandApte, CCM and Central Council Member & Chairman, Research, Journal
Chairman (PD Committee), along with CMA Sanjay Gupta, & IT Committee and CMA BibekanandaMukhopadhyay,
Vice-President met with Smt. Nirmala Sitharaman, Hon’ble Chairman, Eastern India Regional Council of the Institute
Minister of State (Independent Charge) for Commerce & and myself were among the eminent dignitaries present at
Industry to discuss about enhancement of Scope of Cost the Discussion Meet. There was an august participation of
Accountants in the Special Economic Zones. eminent academicians, researchers, industry people and
 Data Bank of PCAs professionals and the event concluded with overwhelming
Professional Development Committee of the Institute response from the participants.
has decided to create a “Data Bank” of PCAs specifying Technical Directorate
their professional skills, experience, expert domain areas  CASB
and geographical jurisdiction of practice. It is intended to I am happy to inform that the Cost Accounting Standards
share this data bank with the concerned Central and State Board (CASB) in its recently held meeting approved the
government departments/agencies, regulatory bodies and “Limited Revision of Cost Accounting Standards (CASs) on
tax authorities, etc. as may be required by them. The members account of impact of IndAS”. You may be aware that the
are requested to provide their details as per the Performa exposure draft for the said Limited Revision was released
available at: http://eicmai.org/PD_Application_Test/ by CASB for public comments/ suggestions through the
Research and Journal Department Institute website in February 2017. The Board considered the
 Workshop on GST for Eastern Railway comments/ suggestions and improved the “Limited Revision”.
I am pleased to inform that the Institute organized a workshop After approval of the Council, the said Limited Revision is
on Goods and Services Tax (GST) from 6th to 9th March 2017 being released by the Institute shortly. I believe that this
at JN Bose Auditorium, Kolkata to impart training to the exercise will help the members as well as the students to
officers of the Accounts Department of Eastern Railway. Shri equip and update themselves with the changes happening
DipankarLahiri, FA CAO, Eastern Railway, Md. JavedMahzar, in the accounting profession.
FA CAO SG Eastern Railway, Smt. Tanuja Thakur, FA,  CAASB
CAO-WT, Eastern Railway, Shri Ramesh Kumar, Dy. CAOG, I am happy to inform that the Cost Auditing and Assurance
Eastern Railway & other officials of Eastern Railway and Standards Board (CASB) in its recently held meeting

considered the draft “Practical Guide to the Standard the International Women’s Day on 8thMarch 2017. Woman
on Cost Auditing (SCA) 101 - Planning an Audit of Cost CMA in practise, service & academics were present.
Statements”. After detailed deliberations, Board directed  The Hyderabad Chapter of the Institute organised Woman’s
the CAASB Secretariat to prepare a comprehensive Guidance day program on 8th March 2017, which was also attended by
Note covering all aspects of cost audit as reflected in the me.
Standards on Cost Auditing, i.e. SCA-101 to SCA-119. The  A student orientation program was also organised at
said draft Guidance has been hosted on the Institute website Hyderabad Center of Excellence by the Hyderabad Chapter
for valuable suggestions of all stakeholders. I urge members of the Institute on 8th March 2017. The students were
and other stakeholders to send their comments within addressed by me, CMA (Dr.) PVS Jagan Mohan Rao, CCM
stipulated time. and the Chairman, Hyderabad Chapter.
 Insolvency Professional Agency of the Institute (IPA of  To groom the Young CMAs of eastern region one day
ICAI) orientation programwas organized by the Institute in
 I am happy to share that two more Insolvency Professionals association with EIRC on 9thMarch 2017. Young CMAs
who registered under limited period based on 15 years’ participated in the programactively and appreciated the
practicing experience have passed the “Limited Insolvency initiative.
Examination” conducted by Insolvency and Bankruptcy  Bangalore Chapter in association with Mysore, Mangalore
Board of India (IBBI). I urge the cost accountants who & Bhadravathi - Shimoga Chapters of Cost Accountants
registered as Insolvency Professionals under limited period organised Karnataka CMA Convention on a the theme ‘Global
to pass the examination before their registration expires in Economy - Steering India Forward’ on 11thMarch 2017 at
May/June 2017. The professionals can perform an excellent Bangalore. I congratulated the organisers for choosing such
job as Insolvency Professionals by utilizing their expertise in an important theme as in view of the prevailing challenging
revival and resolution process of the sick companies. economic scenario the theme holds a special significance.
 The Regional Council and Chapters have conducted  Lucknow Chapter of the Institute organised program
6 seminars/ program in March 2017 on Insolvency and “Abhyuday 2017 - Reinforcing India with CMA’s” at
Bankruptcy Code at places like Mumbai, Bhubaneswar, Lucknow on 19th March 2017. I appreciated the Chapter for
Ankleshwar, KalyanAmbernath and Indore. I expect the selecting such a well-timed and important theme for the
Regional Councils and Chapters to conduct more such event which included sessions on Digitisation and GST.
programs to build the technical capacity of members to  EIRC conducted Programme on “Conducting Audit
enable them function as Insolvency Professionals for revival under SAP Environment”on 25th March 2017. CMA Tapas
of sick companies, liquidation and bankruptcy. Bhattacharya, FICO consultant addressed the members on
 I am pleased to inform that Institute in association with the subject.
EIRC is conducting two such programs: one specifically for  Surat-South Gujarat Chapter of the Institute organised
bankers on 21stApril 2017 where Dr. M.S. Sahoo, Chairperson, events on completing glorious 25 years of its constitution
Insolvency and Bankruptcy Board of India will be Chief Guest 25 th&26 thMarch 2017. Through my video message I
and other on second day especially for the professionals appreciated the contribution of members, students and
who desire to appear in limited insolvency examination to staff of Chapter for making it possible. I wished all the
help them to prepare for the examination. members, students and staff of the Chapter all the best for
 A webinar on practical aspects of Insolvency and their journey towards Golden Jubilee. The Chapter organised
Bankruptcy is being planned in April 2017. a seminar on GST and also presenting prizes to students to
 The Insolvency Professional Agency of the Institute will mark the occasion.
be releasing its weekly bulletin from April 2017. The weekly I wish prosperity and happiness to members, students and
bulletin will not only help the Insolvency Professionals their families on the occasion of Ram Navami, Mahavir Jayanti,
(IPs), enrolled with the IPA of the Institute, but also to Baisakhi, Ambedkar Jayanti, Hanuman Jayanti & Easter and pray
aspiring members of the Institute in enhancing their skills for the success in all of their endeavours.
and building capacity to achieve excellence in their role as
Insolvency Professionals. With warm regards,
Initiatives by Regions &Chapters
 EIRC of the Institute organized a Programme on
“Implementation of GST” on 5th March 2017. CMA Ashok B.
Nawal, CCM & Chairman-Taxation Committee of the Institute
was the Resource Person. Members both in service & in
practice attended the programme. (CMA Manas Kumar Thakur)
 EIRC organised an Eastern India Woman CMA Meet to mark 1st April, 2017

ICAI-CMA SNAPSHOTS
otel
frastru cture at H
n S u s ta inable In
ce o 017
Conferen arch 23, 2
National e w D elhi on M
l, N
Taj Maha
een the
O U ) signed betw 17 at
g (M , 20
erstandin tute on March 29
o ra n d u m of Und th e In s ti
Mem p and
dia Grou , Kolkata
Techno In e Institute
e rs o f th Services
Headqu a rt
o n G oods and the
orksh o p aining to
f F o u r Days’ W titute to impart tr ilway and
s o Ins Ra
Glimpse ed by the of Eastern till
a x (G S T ) organiz n ts D e p artment m M a rc h 6, 2017
T A c c o u L td fr o lk a ta
of the on
Corporati um, Headquarters
, Ko
officials tro Rail ri
a ta M e A u d it o
Kolk Bose
2017 at JN
March 9,
ti o n
C o m p e ti
o rg a n iz e d b y 1 6 , 2017
is c u s s io n te o n March
e d G ro u
p D e Ins ti tu wareness
A Focus In d ia (C CI) and th acy and spread a
ion of voc
Commiss tition ad
p h a s iz e on compe hairman,
EIRC,
to em c t. y a y , C
mpetitio
n A
Mukhopa
d h nt, CMA
about Co MA Bibekananda m e n t Consulta y.
:C , Mana g e Dubey, D
From Left r. C h a kravarty S h ri Y ogesh K. is s io n
tap K ent, Co m m achhta
CMA Pra ar Thakur, Presid n , C o m petition e m b e r & n ’s D a y and Sw
um is io il M om e 017
Manas K o.), Advocacy Div Goswami, Counc ational W ers on March 8, 2
ir e c to r (Ec M A A v ijit te e o f th e Institute rv a n c e of Intern e a d q u a rt
D e lh i, C o m m it Obse te’s H
of India,
New D
urnal & IT
C the Institu
n , R esearch, Jo Diwas at
Cha ir m a

Glimpses of National Students' Convocation -2017
held on March 30, 2017 at Eastern Zonal Cultural
Center (EZCC), Kolkata

COVER STORY
LOCAL
BODIES
AUDIT IN
INDIA
CMA Santhosh Kumar M

Auditor
Kerala State Audit Department
District Audit Office
Ernakulam
T
he rural and urban local bodies (The local Self Government Institutions), were in existence even before the
independence of India but their functioning varied widely from place to place. The seventy-third and the seventy-
fourth constitutional amendments brought a substantial change in the status of local bodies in India. Every State
has enacted suitable legislation for devolution of functions, powers and responsibilities to these bodies, including
the power to raise resources based on this constitutional amendment.
There exist a constitutional imbalance between the functions and finances of Local bodies in India. The
functional responsibilities of the local bodies with no clear financing avenues did not supported the true spirit of
the constitutional amendment. Subsequent Central Finance Commissions (CFC) realised these facts and started recommending a
greater share of central funds to the states and allocated direct aid to the Local bodies. Thus the process of decentralization caused

substantial increase in flow of fund from Central Govt. and State Govt. to the local bodies. The increased fund management required
greater accountability and transparency from the local bodies.
Table 1-Recommendation of grant to local bodies by CFCS
In Crore
Central Finance Commission 10 11 12 13 14
Period 1995-2000 2000-05 2005-10 2010-15 2015-20
Panchayat Share 4,380.93 8,000 20,000 63,051 2,00,292.2
Municipalities Share 1,000 2,000 5,000 23,111 87,143.8
Schedule V and Schedule VI areas - - - 1,357 -
Total 5380.93 10000 25000 87,519 2,87,436
Source -14 th CFC Report.
Auditing of Local Bodies It governed and standardised the procedure of auditing Local
Bodies all over India. To improve the poor state of maintenance
The importance of Local Body auditing gained greater of accounts, records and the then existed auditing system, 11 th
importance as considerable share of public fund is spent CFC and later CFCs recommended for the audit of local bodies
directly by the lower levels of the Government. Establishing under the Technical guidance and support of the C&AG and it
proper accounting system and auditing of these institutions are was a condition to draw the performance grants recommended
essential to ensure the accountability. As the Local Government by XIII-CFC. On that basis, an independent audit is conducted by
is in state list under schedule VII of the constitution, it become the C&AG.
the responsibility of the State Govt to ensure its functioning and
accountability. The statutory auditor is appointed by State to The transition to the present organisational structure of Local
ensure it. Body Audit is being established in all most all states with some
exceptions since the CFCs insisted on the existence of a reliable
The Comptroller And Auditor General of India (C&AG) has accounting and auditing system in every state. There are some
the power to ensure that any sum spent from the consolidated variations in some of the states such as West Bengal, where the
fund of India is efficiently and effectively utilised. For the proper statutory auditor is the Examiner of Local Audit who is the officer
conduct of Local Body Audit, C&AG formulated “Auditing under Indian Audit And Accounts Service. Broadly the auditing
Standards For Panchayati Raj Institutions & Urban Local Bodies”. structure of local bodies India can be represented as follows.
Figure 1 - Structure of local body auditing
Local bodies
Panchayat Raj Urban local bodies

Institutions
Internal audit Internal audit
Departmental Departmental
audit audit
Audit by an Authority appointed C&AG Audit Social audit

by State GOVT under an Act
.
Public
Financial Statutory Special audit
Statements Audit audit Audit

COVER STORY
Statutory audit is envisaged as a complete audit where all aspects of

audit is dealt with and a detailed examination is carried out . The audit
is to be conducted in conformity with auditing standards of the CAG and
the Audit manual for Local Bodies of the concerned State.
Audit By the Auditor Appointed by State Government establishing accrual based double entry accounting stem.
The implementation is at different stage in various States. At
a) Statutory Audit- present most of the Local bodies are preparing different types
The authority entrusted with responsibility of audit of Local of financial statements. With the implementation of the new
Bodies, derive their duties and powers mainly from the Acts accounting system proscribed in the accounting manuals, Local
enacted under Articles 243-J and 243-Z of the Constitution of bodies are required to prepare Annual Financial Statements
India, which expect the States to make provision by legislation consisting of Balance Sheet, Income & Expenditure Statement
for maintenance of accounts by the Panchayati Raj Institutions and Receipts & Payment Account, and also the formats
and the Urban Local Bodies and their audit. Various States’ prescribed under Model Accounting System along with Notes
have enacted their own Acts for the maintenance of accounts to Accounts. The audit of these financial statements referred to
and audit of local bodies. The audit mandate thus originates as a ‘Financial Statements Audit’ shall be carried out primarily
in a legislative statute. The powers and duties of such an to establish whether they represent a ‘true and fair’ view of the
auditor, and its reporting requirements are described in the affairs of the local bodies during the period. This Audit is being
relevant statute and Rules of the state. In most of the States carried out by an auditor appointed by the State Governments
the Director of Local Fund Audit(DLFA) [Director of State Audit and in most of the cases it is the responsibility of the Statutory
(DSA) in some states)] or similar authority is appointed as the auditor. As per 14-th Central Finance Commission, to be eligible
statutory auditor for audit of the Local Bodies. Statutory for performance grants, the Local Bodies will have to submit
audit is envisaged as a complete audit where all aspects of audited annual accounts that relate to a year not earlier than
audit is dealt with and a detailed examination is carried out two years preceding the year in which the local body seeks to
. The audit is to be conducted in conformity with auditing claim the performance grant.
standards of the CAG and the “Audit manual for Local Bodies”
of the concerned State. Audit by Controller and Auditor General of India
The DLFA function as the head of the audit department
and organise the audit function by delegating duties and C&AG conducts Audit of local Bodies under Section 14 (1) and
responsibilities to the lower level of the department among section 20(1) of CAG’s (Duties, Powers and Conditions of Service)
his staff. He is required to issue an audit report to each of Act, 1971 and under the provision of State Act if provided. Based
the local bodes on the findings of irregularities if any, including on the recommendations of the Eleventh Finance Commission,
non-compliance with relevant statues etc. of each audit he State Governments are directed to entrust the responsibility
conducted. In most cases he has greater power of reporting for providing Technical Guidance and Supervision (TGS) in
and even have quasi judicial power to summon persons for the connection with the accounts and audit of Local Bodies to the
conduct of audit. The Statutory Auditor usually empowered to C&AG. C&AG serves an Audit Report to each of the local bodies
initiate surcharge proceedings against the persons responsible whose audit is conducted and issue an Annual Audit Report for
for causing loss to the funds of Local Bodies and such amounts all the audit conducted in the particular year which is placed in
can be recovered by the executive authority concerned under the State Legislature.
Revenue Recovery (RR) Act. He prepare a Consolidated Audit
Report every year with respect to the audit conducted in that All essential audit directions of the C&AG are set out in the
year and present it to the State Legislature. Audit Code, while less important instructions and regulations
governing procedure were incorporated in its MANUAL OF
b) Financial Statements Audit- STANDING ORDERS (AUDIT). The principles and procedure in
Accounting of the local bodies are in the transforming this manual are followed in the conduct of C&AG audit of local
stage where all the Local bodies are in the process of bodies.

Social audit check and internal control is its responsibility. Auditing points
weak areas in the financial control. Local bodies have to facilitate
It is a new concept of audit where more transparency is auditing and should make advantage of audit observation for
brought to the functioning of local bodies. The primary objective future improvement. The scope of generating own income and
of social audit is to bring the activities of local bodies under close utilisation of the fund without wastage bring up efficiency. The
surveillance of the public and the latter to have access to records remedial measures on the observation of the audit is to be timely
and documents of the former. Owing to this mechanism, the dealt so that its occurrence are curtailed.
citizens should be able to have immediate access to information
which would facilitate transparency and accountability in day to Some of the Major Concerns in the local body auditing
day functioning of local bodies.
 Improper planning and budgeting in expenditure.
Other Audits  Low level of internal check and internal control.
 Lack of responsibility and accountability among Local Body
a) Internal Audit – Staff.
In addition to the internal control mechanism established in  Improper maintenance of accounts and records.
the organizational system of local bodies, it is appropriate  Limited number of audit staff and the large volume of work.
to have an audit wing under the functional department of  Lack of professionally qualified accounting and audit staff.
local bodies. The regular inspection of this audit wing at  Need expertise in Auditing in the computerized accounting
local bodies, ensures up keeping of records and adherence to environment.
statutory provision and regulations. It also facilitate as a pre-  Application of more scientific and modern auditing
check for the statutory audit . techniques.
 Need for Concentrating in the core areas.
b) Special Audit –  Cost Benefit analysis and the scope cost control.
It is an investigative or audit in depth with a specific objective  Need for timely audit and reporting .
of verifying or checking some specific type of transaction(s)  Lack of remedial action on audit observation.
or activities. This may be conducted at the discretion of the  Need for strengthening Social auditing
statutory auditor or the state Govt, if such a course appears
to be necessary in any case. The Head of the Department may Conclusion
also in special circumstances request the Statutory Auditor or
any auditor authorised by State Government to arrange for a Far reaching changes is taking place in the country in the
special audit of the accounts of a local bodies for any period. sphere of Local Body activities affecting the nature and volume
of transactions which came under the purview of audit. There
Role of State Government and Local Bodies has been phenomenal growth in plan expenditure arising from
tremendous increase in developmental activities of local bodies.
State Government is responsible for the enactment of Acts and If Audit has to be meaningful and effective, the audit procedures
rules for Audit of local bodies and its amendments as required and practices cannot remain static and have to keep pace with
by time. Each state Government under the legislative power is these changes. Accordingly, continuous effort is to be made to
responsible for preparation an audit manual for the conduct of bring out a revision of audit technique and procedures.
audit of the local bodies with due consideration of the auditing
standard issued by the CAG. Ensuring the functioning of Local References
Fund Audit Departments with essential infrastructure and 1. Central Finance Commission reports
qualified manpower are to ensured by the Govt. The State need 2. National Municipal Accounts Manual & National Panchayat
to take remedial measure on Audit reports of CAG and Statutory Accounts Manual
Auditor placed in the state legislature. The constitution of “Local 3. Auditing Standards For Panchayati Raj Institutions & Urban
Fund Account Committee” and its functioning is essential for the Local Bodies”.issued by CAG
effectiveness of Local Fund Audit. 4. CAG’s (Duties, Powers and Conditions of Service) Act, 1971
Local Bodies are the most befitted by the auditing process.

For efficient auditing, proper accounting and recording of
transactions is to be ensured. Building a sound system of internal [email protected]

COVER STORY
A Study on Internal Audit System of the
Gram Panchayats
in
W E S T B E N GA L
largely confined to acting as the delivery mechanisms of the

programmes of the Central and State Governments. However, with
Dr. Sanjib Kumar Basu the evolution of time it gradually moved towards autonomous
Dean and Associate Professor functional units of independent local government. This has
St. Xavier’s College necessitated the need to undertake initiatives to establish a
Kolkata framework of stringent governance and institution building,
decentralization and development of social infrastructure and
T
effective audit mechanism for ensuring a resilient public service
medium and discharging other autonomous functions.
he role of Gram Panchayats in the rural polity
has evolved throughout history from stages Rationale of the Study
when it constituted of individuals appointed
by colonial rulers to perform functions of the Recent years have witnessed a rapid expansion in the range of
palliative nature in the grass-root rural setting activities performed by the Gram Panchayats in West Bengal. The
of pre-independence era. expansion in the panchayat activities in this State has taken place
not only in the traditional spheres of providing civic facilities to
On the basis of West Bengal Panchayat the villagers, but also in many non-traditional areas. Panchayats
Act, 1973, the present generation Panchayats in the State operating in this State are now requiring associating themselves
were installed in 1978, 15 years ahead of 73rd Amendment with various kinds of employment generation, poverty alleviation
of Constitution in India. Since their inception, the State has and environmental improvement programmes and activities. The
demonstrated strong commitment to rural decentralization by: State Government in recent years has transferred many of the
functions of its different departments to gram panchayats and
a) Ensuring regular election to Panchayat Raj Institutions (PRIs) other agencies of the local governments. As a result, a substantial
expansion has been witnessed in the volume of panchayat
b) Entrusting with increasing responsibility of implementing spending. To match the increased spending volume, many new
various rural development programmes. sources of revenues have been tapped and additional ones are
being explored. The growing complexity of panchayat economic
c) Making the development bureaucracy part of PRIs. operations has brought in its wake the need to revitalize the
accounting and auditing system followed by the Panchayats in
During 1980’s and early 1990’s, the Panchayats remained the State. The system of panchayat accounting and auditing

followed till recent past is characterized by many defects and deficiencies. It was based on a set
of archaic rules that have long since ceased to be relevant or effective. The rules were grossly
inadequate in providing a basis for informative financial accounting and reporting. The
users of panchayat accounting reports are in need of much more information about the
financial events and phenomena of the panchayat organisations than was available under
the old system.
Gram Panchayat Audit System in West Bengal
The accounts and auditing practices in the gram panchayats of West Bengal are mainly
governed by the West Bengal Panchayat Act, 1973 and the West Bengal (Gram Panchayat)
Accounts, Audit and Budget Rules, 2007. Accordingly, there are four types of audit a gram
panchayat in West Bengal has to conduct in a year. These are:
1. Statutory Audit: Once a year after the completion of the accounting year by the
Examiners of Local Accounts of Auditor General, Bengal.
2. Internal Audit: Once a quarter, i.e., four times in a year by the Panchayat
Accounts and Audit Officers (PAAO) posted in the Panchayat Samitis.
3. Social Audit: On a regular basis throughout the project work by
a team of social auditors formed from the beneficiaries
of the project under different programmes of the
Government including MGNREGS.
4. Special Audit: As and when required
and recommended by the higher
authority.
In terms of Section 186 of the Panchayat

Act, 1973, the accounts of the PRIs shall be
examined and audited by an auditor appointed in that
behalf by the State Government at such time and place, to
such extent and in such manner as the State Government may
prescribe. Accordingly, the Examiner of Local Accounts, West
Bengal is appointed as Auditor to examine and audit cent per
cent accounts of the funds of the Gram Panchayats from the
financial year 2002-03 onwards.
In conducting the audit of PRIs, the auditor appointed by the State

Government shall be guided by the provisions of the Panchayat Act, 1973, and the rules
framed there under and orders issued by the State Government from time to time in regard to functioning of PRIs.
Internal Audit of Gram Panchayat
In terms of Section 196A, internal audit of the accounts of the fund of the Gram Panchayat shall be conducted by the Internal
Audit Officer having jurisdiction at least once in every three month. In conduct of the internal audit, the major thrust is to identify the
procedural irregularities or lapses and financial impropriety, if any, in the matter of maintenance of accounts and Internal Audit Officer
shall make notes of the same and shall render all possible assistance and guidance in the matter of reconciliation and rectification of
the accounts and also of the functional process of the Gram Panchayat.
At the end of every three month, the Internal Audit Officer is required to prepare a quarterly report for each Gram Panchayat
incorporating therein all irregularities noticed by him during the period mentioning the remedial measures taken, if any, and within

COVER STORY
one month from the end of the quarter, within one month from the date of meeting training and posting of internal auditors is
send the first copy of the report to the of the Gram Panchayat, prepare item-wise controlled by the AGWB.
Pradhan of the Gram Panchayat with report of compliance or otherwise on the
copies to the Block Development Officer, said report and send it to the Internal In addition PAAOs are loaded with
Sub –Divisional Officer and the District Audit Officer with copies to the Block responsibilities other than their audit
Panchayats & Rural Development Officer. Development Officer, District Panchayat duties. In certain instances other duties
and Rural Development Officer and Sub are thought to consume up to 80% of
When the Internal Audit Officer is of Divisional Officer. their available time although the picture
the opinion that a Gram Panchayat is varies across the small sample examined.
making persistent default in maintenance If within the period specified, no What seems clear however is that the
of books of accounts, registers and other information is received by the Internal requirement that each GP is visited once
records or making unnecessary delay or Audit Officer from the Pradhan of the a month is in the majority of cases not
negligence in taking appropriate measures Gram Panchayat or if the grounds for achieved with visits sometimes as long as
to rectify or reconcile the defects and non-compliance given by him on such six months apart.
discrepancies pointed out by internal report are not deemed to be satisfactory,
audit, or when there is an irregularity or the Internal Audit Officer shall refer the It is difficult to verify the quality of the
impropriety of such serious nature as may matter to the Block Development Officer audits carried out since in most instances
require attention of higher authorities or who shall issue necessary direction to quarterly audit reports are not prepared.
where there is an alleged misappropriation the Gram Panchayat, with a copy to the Anecdotal evidence suggests that many
or defalcation of fund, he shall submit a Sub–Divisional Officer and the District PAAOs play a useful and productive role
special report to the Block Development Panchayat and Rural Development Officer. in advising and helping the auditee in their
Officer with copy to the Pradhan of work. However, it is impossible to judge
the Gram Panchayat concerned and If within thirty days from the date how far this work might be described as
endorse a copy to the Sub-Divisional of issue of any direction by the Block internal audit as opposed to “internal
Officer and the District Panchayats and Development Officer, no information is consultancy”. This is not to say that this
Rural Development Officer concerned, received from the Gram Panchayat or if the work is valueless; but does cause doubt
mentioning therein the specific defaults explanations submitted are not deemed to be shed on both the understanding
of the Gram Panchayat and corrective to be satisfactory, the Block Development of what proper independent internal
measures suggested by him. Officer shall initiate a proposal for auditing is and on the amount of time
conducting a special audit in terms of and effort that is spent on the provision
Within a fortnight of receipt of internal section 196B. of an effective and independent internal
audit report or special report from the audit service which provided management
Internal Audit Officer, the Pradhan shall Findings of the Study with the confidence that systems are
place the same before the Artha-O- operating efficiently and are complied with
Parikalpana Upa-Samiti for consideration This study has revealed substantial consistently across the Panchayat system.
and for suggesting appropriate measures gaps in both the coverage and quality of
to rectify or reconcile the defects and the internal audit carried out within the This situation is compounded by the
irregularities in the manner indicated in PRI system. The main cadre of internal absence of an independent reporting line
the said report. auditors – the PAAOs – suffers currently for the PAAOs and other internal auditors.
from a vacancy rate of 15%. While the The situation where the PAAO is seen as
The Pradhan shall convene a meeting of PRDD is taking steps to reduce this integral to the staffing of the Block is
the Artha-O-Parikalpana Upa-Samiti with vacancy rate the age profile of the PAAO unsatisfactory and leads to instances
specific item of agenda in this behalf to cadre is likely to mean that vacancy rates of their being diverted to other non-
consider the observations of the Internal will increase in the medium term unless audit tasks, a lack of independence and
Audit Officer and recommendation or palliative action is taken. It is appreciated is largely responsible, in the view of the
views of the Artha-O-Parikalpana Upa- that this is not an issue that the Panchayat study, for the lack of attention that is paid
Samiti thereon keeping a record of the and Rural Development Department can to their recommendations.
entire proceedings of the meeting. address on its own since trained audit
resources are at a premium throughout Training for internal auditors is
The Pradhan shall as early as possible the Govt. of West Bengal and recruitment, considered inadequate both in its coverage

of the population and its breadth and depth in technical detail. the challenge involved in these proposals. The existing audit
Although it was not possible to examine in detail the training methodologies are outdated, the institutional structures do not
curriculum for internal auditors the study reveals that there is support the work that is carried out, capacity is low and poorly
much work that needs to be undertaken by the Panchayat and trained and the solutions to the problems will involve stakeholders
Rural Development Department to update internal audit practices other than those within the panchayat system. In the face of
and to provide better training for the next generation of internal these obstacles, the study reveals that technical assistance will be
auditors of the Panchayat system. required. The exact scope of any technical assistance would need
further definition but would need to include, inter alia:
All this needs to be viewed in the light of a fundamental
re-organisation of audit responsibilities within the system which  A more detailed and comprehensive survey of the coverage
is still being implemented and the results of which are unclear. of internal audit across the panchayat system.
Briefly, the PAAOs are to be re-designated as Accounts Officers at  An examination of the auditing techniques employed by
the Block level (a move which can only further limit the time which statutory, internal and performance auditors with a view
they spend on internal audit duties). The Panchayat Development to identifying gaps and overlaps both in methodologies and
Officer (PDO) will assume responsibility for carrying out what is coverage of the population of Panchayats.
described as “performance audit”. It is not clear in the study what  Updating of internal audit methodologies and re-design of
impact this will have on the amount and quality of the internal audit programmes in the light of the above.
audit work that was previously carried out by the Panchayat  A training needs analysis of the existing cadre on internal
Accounts and Audit Officers. Nor is it clear that the distinction auditors to identify the “training gap” between existing
between “performance audit” and internal audit is properly skills, knowledge and attitudes and the skills that will be
understood. Additionally EOPs were previously responsible required to use the new methodologies identified above.
for carrying out statutory audit and it has seen no evidence to  Design and delivery of training (training of trainers) to
suggest how well they are qualified to carry out “performance support the introduction of the new methodologies.
audit”. There is considerable risk therefore that this change will  Design of an appropriate institutional structure to link
result in gaps in coverage in some areas and potential overlaps audit cells at all levels of the Panchayat system including
between statutory, performance and internal audit. the Department itself.
In order to seek to address some of the issues around the Conclusion

lack of independence of internal audit and the lack of a proper
institutional structure which supports the integrity and status The analysis presented in this study has revealed generally poor
of internal audit within the panchayat system the study has and out-dated provision of internal audit across the panchayat
recommended the creation of independent audit cells. These system. The problem is multi-faceted and not just an issue which
cells will exist at all levels of the Panchayat hierarchy and should is confined to the Department. The solution will involve not only
be linked in to a state level audit cell within the Panchayat and extensive capacity-building (including radical up-dating of audit
Rural Development Department which will be the pinnacle of the methodologies) but also changes to institutional structures
system and which will support the Department in discharging its as well as changes to relationships between the stakeholders
responsibility as Accounting Officer. This recommendation has organisations involved.
far-reaching implications and needs further study. It may, for
example, be seen as going against the grain of the decentralisation Given the magnitude of the problem it has been argued
agenda. However, in the view of the study findings, such an strongly that technical assistance will be required to make any
initiative is essential if an effective and holistic system of internal substantial and sustainable impact upon the overall effectiveness
control and check is to be introduced covering the panchayat of internal audit in the panchayat system. It is therefore
system. The proposed increase in funding to support rural recommended that the Panchayat and Rural Development
decentralisation in West Bengal adds further weight to the case Department should initiate further study to address the
for those funds to be properly and effectively managed, controlled issue and eliminate the problems.
and audited.
Scope of improvement
[email protected]
However, the study does not underestimate the immensity of

COVER STORY
Amplifying Revenues In
PANCHAYATI
RAJ SYSTEM
Dr. Vidya. R
Research Scholar
Kuvempu University
Shankarghatta
Sharath Ambrose
Research Faculty
Kuvempu University
Shankarghatta

Every village has to become a self-sufficient republic. This does not require
brave resolutions. It requires brave, corporate and intelligent work

-Mahatma Gandhi
I
n decentralization process, responsibilities are the “common pool” problems associated with local public goods,
transferred from central and state government to local the revenue assignment should ensure that beneficiaries of public
institutions. There have been a number of benefits and service by and large pay for the public services consumed.
barriers mentioned with respect to rural development
through process. The major mentioned benefit being Literature Review
that the transfer of responsibility enables government
to be more accountable and transparent. In this Rishi Pal (2002) has conducted a study on the Finances of
view panchayat raj system is one of the most ancient socio- PRIs in Haryana with the objectives to analyze, inter alia; the
economic and political institutions in India, which provides an devolution of powers to Panchayats in Haryana and, on the basis
opportunity for local people in planning, implementation and of that, the researcher suggested some measures to increase
monitoring of rural development schemes for their benefit, the financial resources of the Panchayats. The study is mainly
taking into consideration the local poor needs, availability of based on secondary data collected from different sources.
local resources and most importantly through participation of However, some information on income and expenditure has also
the local people themselves. PRIs have to play a major role for been collected from Kurukshetra, Karnal, Kaithal and Jind Zila
the rural development. Parishads. The findings of the study, among others, include: the
only source of income on which Panchayats are depending in
In the Indian context, decentralization to rural local the income from land; trend of grant- in –aid and other sources
governments is meaningful only when the panchayats have are just nominal and grants are not being increased on yearly
adequate untied funds to provide public services assigned to basis; the Haryana Panchayat Raj Act, 1994 does not empower
them. Untied funds would imply that either the panchayats PRIs to mobilize adequate resources. Even some of the taxes and
should be able to raise tax and non-tax revenues from the sources cess levied earlier have been abolished; declining trend of own
assigned to them or higher level governments should provide revenue. Based on the findings, the study suggested that there is
unconditional transfers by way of share in taxes or block grants. need to give clear-cut powers to the Panchayats in order to enable
Even though transfers are inevitable at local levels as they do them to impose taxes and fees at their level besides restructuring
not have comparative advantage in raising revenues, requiring the administrative set-up of the Panchayat Raj System and proper
them to mobilize “own” revenues is important both for reasons of maintenance of the common property resources.
efficiency and accountability.
Indira. A (2007) has analyzed the Finance of Gram Panchayat
Thus, critical factor necessary for strengthening panchayats and its potentiality in development of rural area. A quantitative-
is to enable and empower them to enhance their own revenues. descriptive study conducted in 6 districts in Karnataka,
Improving own revenues strengthens the link between revenue which were top and bottom listed panchayats in Karnataka.
and expenditure decisions of the rural local bodies at the margin, To accomplish that, the study undertaken revenue source of
which is extremely important to promote both efficiency and panchayats, in which central and state grant-in-aid, share of total
accountability in the provision of services. Linking the decision revenue component and total expenditure impact on the finance
to provide public services with raising revenues at the margin is of gram panchayats. The results reveal that there is an increasing
extremely important to ensure efficiency and accountability in trend in the unutilized funds of ZPs year after year. Hence it is
public service provision. Although it is not possible to raise the required that performance audit be made at the GP level about
entire revenue required to finance expenditures at sub national the various programs undertaken under the various schemes. The
levels, the system should ensure that the burden of public study also pointed out that the there is need of improvement in
services provision is not shifted to non-residents. To minimize revenue generation as GP needs to think more creativity such that

COVER STORY
people would be willing to pay taxes for a better living all around.
Anadi Biswas (2010), attempted to study on financial

The financial support of administration in Panchayat Raj Institutions. It throws a light
local government is believed to have on problems in different levels in Panchayat Samiti’s inflow and
imperative applications for local outflow of funds. It also covered general problems other an
self-governance and democracy. In Accounting and Finance. The another suggestion he has given to
India local systems are to exercise Panchayat system to increase own funds in Panchayat Institutions
by potential drives like, realizing the accrued tax, income from
diplomacy over the way they carry fisheries, fruits cultivation, establishment of small and cottage
out their functions and to determine industries and mechanism for sound financial control with
the level and model of expenditure separations of duties, functions, authorities and responsibilities
on them, they should be responsible of each officers in Panchayat Raj Institutions.
for finding the money through
Jayanta Dutta (2013) brought out the Panchayat finance and
local sources for which they are the level of management about panchayat finance in West Bengal.
accountable. With this view the Panchayat resource has been assessed in order to determine
government started formulating plan the strength, weakness, opportunities and threats (SWOT). The
and policy of our country assigning key tools of financial management are Budget as statement of
the top priority to agriculture and estimated receipts and expenditures, maintains of accounts and
their audit is also helpful for the management of their finance. To
rural development. This is only support the financial activities of panchayats, it has to improve
possible when panchayats have their financial position by expansion of resources that should
adequate united funds to provide be made through sources of revenue mobilization. Finally this
public services author conclude by saying that for an effective performance of
the functions assigned to the Panchayats, adequate resources
should be provided to them so that they can not only meet the
local needs but also improve the economic base of the local areas.
Suman Chakraborty (2014) in their article discussed the

inflow and utilization of own sources at selected cities of
The measures Panchayath Raj at West Bangal. In the study author opined that
the gram panchayaths are considered as people’s institution
visualized from first
and ethics of their functioning is based on the spirit of
five year plan had democracy where people’s choice and voice are adequately
considerable bearing captured. In participatory development it is very difficult to state
for the growth of rural categorically the exact nature of participation in plan formulation
economy. The first and implementation of different rural development programs
and also the author clearly identified that the involvement of
five year plan laid
the people in the planning process is necessary to take
down the expansion into account their felt needs, to mobilize local resources, to
of agriculture based increase the speed of implementation by securing the people’s
on the deployment of cooperation, to increase the acceptance of the plan and
manpower resources projects and also to bring about a change in the power
structure in people’s institutions in favor of the poor. Strong
of the country side and
leadership and political will are the necessary conditions for
the highest use of local facing the challenge of enabling the local self-government
resources institutions to become effective instruments of social and
economic development of rural areas. Therefore in order to
bring out participatory development in west Bengal section 16

A has been amended. This executive body of the Gram Sansad Gram Panchayats, Taluk Panchayats and Zilla Panchayat. The
has been given the task to prepare plan for economic as well as questionnaire was designed to study beneficiaries and officials
social development of rural areas with the active participation of opinion on funds requirements and alternative measures to
local people. In performing these functions, gram panchayats enhance revenue at panchayat level. For the purpose of present
are mainly dependent on external sources of revenue, which study 100 respondents as officials and 280 beneficiaries form
basically comes from central and state governments. But by 7 Taluk panchayats, 28 Gram panchayats in Shivamogga
external fund are very much irregular in nature. This affects the Zilla panchayat, Shivamogga District, were selected using multi
progress of decentralized planning. Hence great emphasis is now stage and simple random sampling technique. These methods
made on mobilization of own resources of panchayats. were used in order to ensure desired number and appropriate
subgroups are indentified in the survey.
P. Chattopadhyay (2014), has sought to highlight on the
important issues which have brought major achievements in Statistical Tools used for Data Analysis
transforming India’s rural economy through panchayat raj
institutions to have financial stability. The researcher identified The responses obtained from the respondents are tabulated
the first and foremost problem is of the right orientation towards using SPSS and are processed using Excel. To analyze the data
development. Second, utilization of funds received funds from and to interpret the analysis, simple Percentage, z proportion
central and state government without any diversion of such funds test, t test and descriptive statistics are used. For the purpose
for the other purpose and third to work out the inflow and outflow of testing hypothesis of significance of the variance in factors
of money by traffic of money to have acceleration of resources qualified as influences on beneficiaries and officials responses,
to utilize in productive way as revenue yielding activities. The Z test is used. With these details about the objectives and
author finally suggested based on the issues in panchayat raj methodology, an analysis is made in the following paragraphs
system that financial stability has to be generated mainly from to identify and analyze the fund requirements and revenue
their activities either assigned to them from outside or engineered generation activities in PRI’s.
by themselves, as also laid down in the cognate legislation.
Following hypothesis was formed for analysis:
Objectives of the study 1. H0 :Beneficiaries attitude towards need for additional funds
is equal to the converse
The study was undertaken to attain the following objectives. H1: Beneficiaries attitude towards need for additional funds
is not equal to the converse
 To identify the various revenue generation activities adopted 2. H0: Perception on revenue generation activities between
by the Panchayat Raj Institutions. beneficiaries and officials is insignificant
H1: Perception on revenue generation activities between
 To examine the level of perception of officials and beneficiaries and officials is significant.
beneficiaries on revenue generation activities of PRI’s. 3. H0: Beneficiaries attitude towards utilization of funds is
equal to the converse
Research Methodology H1: Beneficiaries attitude towards utilization of funds is not
equal to the converse
Type and Scope of the Research: Earlier studies on sources
of revenue and revenue generation activities in PRI’s revealed a Conceptual Model for Revenue Generation in PRIs:
tendency to more on sources of revenue from government grant-
in-aid that is central and state government plans and neglected Entrepreneurship
on the part of utilizing its own resource for revenue generation
in gram panchayats, Taluk Panchayats and Zilla Panchayat
in Shivamogga District, Karnataka State, with view to officials
and beneficiaries, hence the study is explorative research
methodology.
Sources of Data and Sample Size: The required and relevant data
are collected from Primary sources. The primary data obtained
by administering the questionnaire and schedule to officials in

COVER STORY
Local fund generation at Grama Panchyat Level Chief

1 1.0
Administrator
The model tries to elaborate the possibility of fund generation Planning
1 1.0
within grama panchyat. In the malnadu belt there is a huge variety Officer
of natural resources, which can be made used to generate revenue Development
1 1.0
Officer
for the local governance. These resources can be exploited with
due care to boost the economy as well. It is found in the study EO 7 7.0
that the beneficiaries of panchyat system have enough literacy
Project
and skills required for rural entrepreneurship. But there is a 1 1.0
Manager
need of technical support with training of latest technology Asst. Accounts
in operations to have better yield in terms of productivity and 8 8.0
Officer
margin. Thus rather expecting funds from central and state, grama Dist. Social
panchyats can make an effort to use knowledge and skills of local 1 1.0
Audit officer
human resource, geographical advantages and provide technical
Manager 8 8.0
orientations to enable startups. This shall reduce the burden for
local government of expecting additional funds from central and
PDO 27 27.0
state, but enable the beneficiaries to develop themselves and
create revenues too. Thus the model will ensure local revenue Secretary 27 27.0
generation, improves living standards, empowerment of villages
and develop entrepreneurship intent. FDA 16 16.0
The scope of this model for driving entrepreneurship with Total 100 100.0
available resources extend to mushroom cultivation, earthworm
Source: Primary data
cultivation, organic farming for fruits/vegetables/flowers, honey
bee farming, traditional food joints, boating/rafting in lakes, dry From the above table, it is clear that among 100 sample
fruit processing, waste management, food processing (jams/ respondent, officials’ 27 respondents are PDO’s, 27 respondents
squashes) etc. All the identified micro scale industries are not new are secretary, and 7 respondents are EO, 8 respondents are
to the village level to start from scratch. Village people are good Managers, 8 respondents are Assistant Account Officer and 16
in understanding the knowledge requirements of such industry. respondents are FDA. Remaining official categories like project
Hence, if grama panchyats can work as catalyst in initiating the manager, CEO, CAO, Development officer, planning officer, Chief
movement of entrepreneurship at village level, grama panchyats administrator, and District Social audit officers are also included
can set a burly bottom of economic pyramid. in the respondent groups but only 1 respondent in each category.
Hence it can be concluded that majority of the respondents
1. Results and Discussions: officials included in the sample are PDOs and Secretaries, due
to sample taken for the study was 28 Gram Panchayats hence,
1.1 Demographic Profile of the respondents
PDOs and Secretary constituted around 27 in each categories.
In order to prove the above stated objectives demographics In case of Bejavanalli gram panchayat secretary is deputed from
the respondents (officials and beneficiaries) are tabulated and Tudur gram panchayat and Kanchinkatte gram panchayat PDO is
presented below. deputed from Bidere Garm Panchayat, Due to improper human
resource planning in PRIs.
Table 1.1: Officials Demographic Profile
Table 1.2: Classification of respondents based on their
Classification of Respondents based on their Designation period of association with their office
Length of %age to total number

% age to total number of Frequency
Designation Frequency Association of respondents
respondents
Less than 1 year 8 8
CEO 1 1.0
1 to 3 years 34 34
CAO 1 1.0

Length of %age to total number Classification of Respondents based on Religion
Frequency
Association of respondents
Hindu 256 91.43
3 to 5 years 25 25 Muslim 16 5.71
5 to 10 years 26 26 Christian 5 1.61
Others 4 1.25
10 and above years 7 7
Total 280 100
Total 100 100
Classification of Respondents based on Marital Status
Source: Primary Data
Married 248 88.57
From the above table, it can be clear that among 100 Unmarried 22 7.68
respondent officials 34 respondent’s length of service is 1 to Widow 6 2.14
3 years, 26 respondent’s length of service is 5 to 10 years, 25 Separated 5 1.61
respondent’s length of service is 3 to 5 years, 8 respondents
Total 280 100
length of service is less than 1 year and only 7 respondents length
of service is above 10 years. Hence it s concluded that majority of Classification of Respondents based on Occupation
the respondent’s length of service is 1 to 3 years. Agriculture 150 53.57
Govt Employee 18 6.25
1.2 Beneficiaries’ Demographic profile
Private 6 2.14
Table 1.3: Demographic Profile of the Beneficiaries. Self employed 107 38.04
Total 1120 100
Classification of Respondents based on Gender
Classification of Respondents based on Spouse
%age to total Education
Factors Frequency Number of Illiterate 162 57.67
Respondents
Schooling 107 38.21
Male 114 40.71
Graduation 8 2.86
Female 166 59.29
Post Graduation 4 1.25
Total 280 100
Total 280 100
Classification of Respondents based on Educational
Classification of Respondents based on Occupation
Qualification
spouse
Illiterate 120 42.86
Agriculture labor 160 56.96
Schooling 149 53.04
Industrial Labor 24 8.57
Graduation 10 3.57 Self employed 16 5.71
Post Graduation 2 0.54 Unemployed 12 4.29
Total 280 100 Labor 69 24.46
Classification of Respondents based on Caste Total 280 100
Forward 116 41.25 Classification of Respondents based on Monthly Income

OBC 58 20.54 5000 to 7000 69 24.46
Minorities 22 7.68 7000 to 10000 17 5.89
SC/ST 86 30.54 10000 and above 195 69.64
Total 1120 100 Total 280 100

COVER STORY
Above table is an attempt to explain the demographic profile income group of above 10000.
of beneficiaries. Demographic profile of the beneficiaries includes
gender, education qualification, caste, religion, marital status, The intent of undertaking this analysis is to understand
occupation of spouse, spouse education, occupation, monthly whether the officials and beneficiaries are opined the same in
income of the respondents, and their membership with gram terms of opinion on financial need, its utilization and alternative
panchayaths. The study found that, most of the respondents are measures to generate revenue to enhance PRI’s efficiency at
female hence, female are more willing to participate in Panchayat Shivamoga PRI’s.
activities as most of the Panchayat schemes are favoring to women
in rural development activities. Since the survey was conducted 1. H0 : Beneficiaries attitude towards need for additional
to rural people majority of them come under schooling category. funds is equal to the converse
Most of them belong to Hindu and forward community. In case
of occupation most of the respondents are carried agriculture as H1: Beneficiaries attitude towards need for additional
their occupation and majority of the respondents belongs to the funds is not equal to the converse
Table 1.4: Beneficiaries’ attitude on financial need for funds- Z Test
Frequency (%)
Responses Critical Obtained
Factor Result
value zc value zobt
Yes No
There is need for providing additional funds for

91.78% 8.21% 1.96 13.98 H0Rejected
Panchayats.
Since the zobt is greater than the zc at 5 percent significance problems in PRI’s.
level, H0 is rejected. That means beneficiaries opine panchyats
should infuse more funds. They also feel that there is need of 2. H0: Perception on revenue generation activities between
additional funds from central and state government grant-in- beneficiaries and officials is insignificant
aid. With reference to table no. 1.4, it is clear that availability of
funds is less which leads to dissatisfaction among beneficiaries, H1: Perception on revenue generation activities between
which is evident by the above frequency of responses. Hence, beneficiaries and officials is significant.
panchayats has to take care in case of creating awareness among
beneficiaries about fund deployment. Beneficiaries’ attitude Primarily set of weighted average is calculated for both officials
towards need for additional funds is not equal, where as majority and beneficiaries; t-test is used to test the difference in mean
of the beneficiaries opine excess sources of funds shall enhance between officials and beneficiaries. The test results of revenue
their satisfaction, this could reduce the scope for facing financial generation are deliberated as under.
Table 1.5: Officials and Beneficiaries Responses on Revenue Generation in PRIs
SL. Officials Beneficiaries

Factors
No. HDS DS N S HS HDS DS N S HS
1 Disseminating skills and expertise through training 36 20 24 14 6 106 75 32 27 42
Creating awareness to use natural resources for trading

2 33 30 22 8 7 110 69 29 31 41
activities
3 Improving efforts through increasing marketing ability 46 21 19 9 5 113 61 48 22 36

SL. Officials Beneficiaries
Factors
No. HDS DS N S HS HDS DS N S HS
Creating essential congenial atmosphere for trading in

4 42 22 17 13 6 112 60 35 32 41
rural
Creating potentiality to generate employment and

5 45 18 19 6 12 119 60 39 26 36
income by utilizing available resources
6 Scientific assessment of the already available resources 35 29 17 8 11 115 56 47 24 38
7 Preserving resources 38 28 13 8 13 106 60 47 32 36
8 Food processing initiatives 33 31 18 9 9 107 60 49 24 42
Selling them for profit through participation of all

9 36 25 19 11 9 107 65 39 30 39
stakeholders
Source: Primary data
From the above table No. 1.5, it is clear that, satisfaction levels Pooled Variance 0.0048
of officials and beneficiaries against various financial activities Hypothesized Mean
of PRI’s. Out of that 36 officials and 106 beneficiaries are highly 0
Difference
dissatisfied with the disseminating skills and expertise through
Df 16
training. In case of creating awareness to use natural resources
for trading activities33 officials and 110 beneficiaries are highly
t Stat -3.3262
dissatisfied. Both officials and beneficiaries are highly dissatisfied
with number of 46 and 113 in improving efforts through increasing
P(T<=t) one-tail 0.0021
marketing ability. Followed by that creating essential congenial
atmosphere for trading in rural , creating potentiality to generate t Critical one-tail 1.7459
employment and income by utilizing available resources , scientific
assessment of the already available resources , preserving P(T<=t) two-tail 0.0043
resources, food processing initiatives and selling them for profit
through participation of all stakeholders majority of the officials t Critical two-tail 2.1199
and beneficiaries are highly dissatisfied. Source: MS Excel Output
Table 1.6: t- test result From the above table no. 1.6, result depicts the revenue
generation activity is tested to observe the difference in combined
t-Test: Two-Sample Assuming Equal Variances mean of officials and beneficiaries using the test statistic t. Since
the tobt is greater than the tc null hypothesis is rejected at 5
Official Beneficiaries percent level of significance. It indicates that satisfaction level
of officials and beneficiaries does significantly differ with respect
Mean -0.7444 -0.6362 to revenue generation activities in Shivamogga PRIs. Officials
and beneficiaries both are highly dissatisfied with the financial
Variance 0.0078 0.0018 activities of panchayats. Officials are relatively more dissatisfied
when compared to beneficiaries, this is because officials feel
Observations 9 9
additional funds can be generated other than central and state
aids, even beneficiaries opine there is need for additional funds

COVER STORY
but they also feel officials could utilize grants in a proper manner, hence it is suggested to strengthen the financial activities with
proper guidelines and strict implications of 3F’s (Fund, Functions and Functionaries) in the PRI’s.
3. H0: Beneficiaries attitude towards utilization of funds is equal to the converse.

H1: Beneficiaries attitude towards utilization of funds is not equal to the converse.
Table 1.7: Beneficiaries attitude on funds utilization by panchayat’s- Z test
Responses
Frequency (%) Critical value Obtained value
Factors Result
zc zobt
Yes No
H0 Rejected
Funds available are under utilized 72.32 27.68 1.96 7.47
Since the zobt is greater funds available are underutilized than c) Panchayats need to promote opportunities to identify
the zc at 5 percent significance level, H0 is rejected. That means resource generation and mobilization of revenues by utilizing
beneficiaries opine that the funds are underutilized in panchyats. own resources available in the villages. There is need of
With reference to table no 1.7, it is clear that most of the schemes creative efforts from the side of both Panchayats and rural
fund deployment and satisfaction among the beneficiaries is people to explore several planks of activities that have the
less, which is evident by the above frequency responses, hence, potential of generating income and employment. This may
panchayats has to take care of fund deployment in proper reduce the problem of dependency on central and state
channel and effective utilisation of available funds shall enhance grants by the government.
their satisfaction. Since the given funds are not optimally utilized
there exist needs for additional finance. Conclusion:
Suggestions Based on findings and suggestions it is understood that

managing finance in public sector like Panchayat Raj Institutions
a) There have been rigid norms and rules attached to guidelines becomes more critical especially due to socio-economic and
of centrally Sponsored Schemes and Central and State political turbulence, at a more fundamental level several problems
grants, it should be made flexible in order to make planning arise because the systems of the Panchayat is yet to take major
and fund utilization more effective as per local needs. changes. Since the inception of Panchayat Raj Institutions (PRls),
there has been political decentralization through devolution of
b) In a bid to create employment opportunities at the powers, primarily to carry out development programmers at the
grassroots level to generate employment to rural poor, the grass root level. But economic decentralization has not taken
panchayat has to establish skill development centres in place in the true sense it is evidenced as India is still developing
villages. Rural people need skill improvement for example, country and required lot of rural development. PRIs are finding
school and college dropouts, technical students, graduates, difficult to mobilize funds from central and state grant-in-aid
formers and others. schemes, due to fund deficiency most of the developmental
plans are incomplete in rural area hence, there is need to enhance
alternative measures to enhance fund/revenue stability. Since the
majority of GPs are facing deficit budget, there is an essence of
creating positive net present value (NPV) projects to generate
funds and used to make up the deficit in grants.
Therefore, focused action on internal revenue generation

by incentivizing competition among panchayats, creating
awareness among the rural people about local resources and
its opportunities to generate revenue through entrepreneurship
activities could have a transformative effect on local
governance and, more fundamentally, the quality of life of
citizens in rural India.

References 5. Suman Chakraborty “Growth and Utilisation Ration of
Own Sources Revenue of Gram Panchayats in Howrah
1. Rishi Pal, “Analysis of Finances of Panchayat Raj District of West Benga”l, The International Journal of
Institutions in Haryana”, A Thesis submitted to the Humanities and Social Sciences, ISSN 2321-9203, Vol.2
Kurukshetra University, Kurukshetra for the award of the Issue 7, pp- 124-131 www.theijhss.com
Degree of Doctor of Philosophy in Economics, pp 1-165,
2002 6. CMA Dr. P. Chattopadhyay, “Financial stability of
Panchayat raj institutions: the Indian context”, The
2. Indira.A, “Finance of Gram Panchayat and its Potentiality Management Accountant, The Institute of Cost Accounts
in development of rural area”, pp 1-170, 2007 of India, pp 1406-1409, 2014
3. Anadi Biswas , “Adequacy of Fund for Rural area, through

the Panchayat Raj- A Case Study”, Southern Economist,
pp 5-6 October,2010.
4. Jayanta Dutta, “Financial Management of Panchayat:

An overview of West Bengal”, International Journal of
Innovative Research and Development, ISSN:2278-0211, [email protected]
Vol 2, pp 501-508, 2013. [email protected]
Form IV
Statement about ownership and other particulars about The Management Accountant, to be published under
rule 8 of the Registration of Newspaper (Central) Rule, 1956
1. Place of Publication : 12, Sudder Street, Kolkata 700 016

2. Periodicity of its publication : Monthly
3. Printer’s Name : CMA Kaushik Banerjee
Nationality : Indian
Address : 12, Sudder Street, Kolkata 700 016
4. Publisher’s Name : CMA Kaushik Banerjee
5. Editor’s Name : Dr. Debaprosanna Nandy
6. Names and addresses of individuals who : It is the official organ of The Institute of Cost
own the newspapers and partners or Accountants of India
shareholders holding more than one
percent of the total capital
I, CMA Kaushik Banerjee hereby declare that the particulars given above are true to the best of my knowl-
edge and belief.
Dated: 10th April 2017 CMA Kaushik Banerjee

Signature of Publisher

COVER STORY
Role of Government Sponsored Schemes -
India's Journey Towards
Rural Development
L. Srinivasan
Senior Manager
Inspection Department
Indian Overseas Bank
Chennai

Is India a rich country or a poor country? If we put this question across any audience, we will probably
get both the answers – Yes and No. The reason is that India is prosperous but the prosperity is not
equitably distributed. More than 50% of the Indian population lives Below Poverty Line- wherever we
draw the line. Poverty alleviation is a painful process and it requires the strong will of the Government
and collective efforts of the implementing agencies. . Unless all stakeholders take efforts in tandem,
poverty cannot be eliminated. Government policies should be in the direction of poverty eradication. It
is in this context, that Government of India has been launching various schemes, with the focus of lifting
the BPL families to APL (Above Poverty Line).
Earlier initiatives of Government in their journey out of poverty and towards prosperity.
Integrated Rural Development Programme (IRDP) and Prime NRLM provides continuous hand-holding support to SHGs and
Minister’s Rozgar Yojana (PMRY) were the earliest schemes of their federations. This aspect was missing in the earlier scheme
the Government. Agriculturists and village artisans were the SGSY). NRLM enables the formation of a cadre of community
beneficiaries under this scheme. Agriculture and allied activities professionals from among the poor village women.
such as Dairy development, Poultry farming, floriculture are the
strength of our nation. PMRY and REGP (Rural Employment Here, I wish to narrate a few of my own experiences
Guarantee Programme) were later merged into Prime Minister’s in the implementation of NRLM.
Employment Guarantee Progamme.
 There is a branch of Nationalized Bank in Vijayawada,
To fight poverty in both Rural and urban areas, Government of which caters only to the needs of SHGs. There are 250
India brought out two flagship schemes – Swarna Jayanthi Gram SHGs, each with a membership of 10 women, operating
Swarozgar Yojana (SGSY) and Swarna Jayanthi Shahari Rozgar through the branch. They are disciplined groups, each led
Yojana (SJSRY). Even though both the schemes contributed by their leader. They make steady progress to prosperity
significantly to poverty alleviation, Government of India thought and when I interviewed, they exhibited extraordinary
that they lacked the necessary focus. confidence and courage. Their leadership qualities were
amazing!
Focus of NRLM
 Then there is the case of a poor woman, with two young
This flagship programme is aimed at poverty reduction through daughters. Her husband, a drunkard, never provided for
building strong institutions of the poor, particularly women and the home. Dejected, she decided to commit suicide. But
empowering these institutions to access a range of financial then she came to know about an SHG operating in her
services. area (and funded by Indian Overseas Bank). She joined the
group. Her strength is that she can cook good home-food.
A women’s Self Help Group (SHG) is the primary building With the finance she got, she started selling lunch packets
block of this programme. SHGs and Federations of SHGs will be to the workers in the industrial areas of North Chennai.
strengthened. Subsequently she purchased a pick-up van, employed
ladies for support and expanded her business. Now
The strategy of SGSY is “demand-driven unlike allocation based she is self-sufficient and her daughters are getting good
strategy of the earlier SGSY. education. The turning point was the NRLM programme,
operating through SHG concept.
NRLM adopts saturation approach and will ensure that all the
poor in the village are covered and a woman from each family is NRLM and the Panch sutra
motivated to join the SHG.
Regular meetings, regular savings, regular internal lending,
All the SHGs in a village will come together to form a SHG regular recoveries and regular bank operations are the 5-point
Federation. Then there will be a cluster federation. This cluster will agenda fixed for SHGs. Repeat bank finance and Revolving funds
cover ideally 20-25 villages. The village federations and the cluster help SHGs attain their goal of emerging out of Poverty line and
federations are the two strong support pillars of the women SHGs stepping into self-sufficiency.

COVER STORY
Let us see, at a quick glance, the achievements of NRLM, since inception
I Geographical coverage under NRLM
1 Number of States/UTs transited to NRLM 30
2 Number of Districts with intensive blocks in NRLM States 523
3 Number of Blocks identified for intensive approach in NRLM States 3375
4 Number of Blocks where intensive implementation has commenced 3370
5 Number of Gram panchayat in which intensive implementation has started 76777
6 Number of villages in which intensive implementation has started 209 862
II Progress in Intensive Blocks (includes NRLM- EAP/ State Projects
7 Number of households mobilized into SHGs (in Lakh) 357.80
8 Number of SHGs promoted (in Lakh) 30.4
9 Number of Village Organizations promoted 164 892
10 Number of SHGs provided Revolving Fund 813 674
11 Amount of Revolving Fund disbursed to SHGs (in Lakh) 109 566
Source: e-Government app – Government of India figures as on 02 March 2017
These are impressive figures and speak of the success of the Employment through Skill Training and Placement (EST & P), 2)
Programme. However, there is a long way to go. Social Mobilization and Institution Development (SM & ID) 3)
Scheme for Shelters for Urban Homeless 4) Support to Urban
National Urban Livelihood Mission (NULM) Street Vendors (SUSV) and 4) Capacity Building and Training
(CBT).
The scheme has been renamed as Deendayal Antyodaya Yojana
– DAY_NULM and is managed by Ministry of Housing and Urban Through the above two flagship schemes, Government of India
Poverty Alleviation. has drawn the road-map for poverty alleviation in both the Rural
and the Urban India.
Mission of NULM:
Manufacturing and GDP Growth:
The Mission of NULM is to reduce Poverty and Vulnerability of
the Urban Poor Households by enabling them to access gainful Growth of manufacturing sect is vital for the growth of the
self-employment and skilled wage employment opportunities, Indian Economy. Presently, it is the service sector which is
resulting in an appreciable improvement in their livelihoods on dominating the GDP figures. Today’s entrepreneur becomes
a sustainable basis, tomorrow’s industry leader. Therefore, micro and small
enterprises, especially manufacturing units should be financed
NULM operates through a well-defined work flow such as 1) and motivated... Towards this, Government of India brought yet

another scheme called “Prime Minister’s Mudra Yojana” him a small overdraft facility which helped the enterprising young
man to develop his business. With the continuous support of
Prime Minister’s Mudra Yojana for Micro sector the bank, he grew into an industry leader. That was Dhirubhai
(PMMY) Ambani, the founder of Reliance Industries!
Salient features: Prime Minister’s Jan Dhan Yojana, (PMJDY)
The scheme was launched in April 2015. The loans granted by PMJDY is a comprehensive pan-India financial revolution that
banks under this scheme are categorized as a) Shishu (loans up Government of India launched two years ago. A massive on-going
to Rs.50000/-), Kishore (loans granted more than Rs.50000 and operation, PMJDY has made the concept of “Financial inclusion”
up to Rs.500000/-) and Tarun (Loans above Rs.500000 and up a grand success!
to Rs.1000000/-) Loans are given by banks for various kinds of
activities-both manufacturing and services. Mudra card (RuPay) The Mission of PMJDY is to help the poor and vulnerable
card is also given to the beneficiaries. sections of the society to have access into banking services such
as opening accounts, effective remittance and getting loans at
Mudra Yojana has given a focus to the bank lending to the affordable cost. The scheme accident insurance policy and an
micro sector. overdraft of Rs.5000/-. RuPay debit cards issuance is also part
of the PMJDY scheme.
I wish to narrate a classic example of how an entrepre-
neur can become an Industry leader, if he is financed Financial inclusion is important. Government feels that any
at the right time. other financial reforms can wait but financial inclusion cannot.
Financial inclusion will ensure equitable distribution of the
Decades ago, a young entrepreneur had a banking relationship prosperity. It has empowered then common man.
with one of their branches in Mumbai. The branch had sanctioned
Let us see the progress of the Jan Dhan Yojana:
Pradhan Mantri Jan - Dhan Yojana (Accounts Opened as on 22.02.2017)

(All Figures in Crores)
NO OF RUPAY AADHAAR BALANCE IN

Bank Name RURAL URBAN TOTAL % OF ZERO-BAL.a/cs
CARDS SEEDED a/cs
Public Sector Bank 12.18 10.04 22.22 17.32 13.99 51004 25.32
Regional Rural Bank 4.00 0.65 4.65 3.44 2.50 11462 20.81
Private Banks 0.54 0.36 0.90 0.83 0.40 2255 34.60
Total 16.72 11.05 27.77 21.59 16.89 64721 24.86

Disclaimer: Information is based upon the data as submitted by different banks/SLBCs
Source: PMJDY web-site – pmjdy.gov.in
Nearly 27 crore accounts of the poor people have been opened till date and nearly 21 crore RuPay debit cards have been issued in
these accounts. Poor people have deposited their hard earned money of more than Rs.69000 crores in their accounts. More than
75% accounts are active. The above Table shows the success of the scheme. ,
Jan Dhan se Jhan Suraksha:
As the next step to opening of accounts, Government of India extended the benefit of Life Insurance and Health Insurance to the

COVER STORY
poor and unorganized sectors of the country, through two new StartUp India is an innovative initiative of India to build a
schemes strong eco-system for nurturing innovation and start-ups in the
country.
Pradhan Mantriu Jeeven Jyothi Bima Yojana: Life Insurance is
provided for Rs.2 lakhs for a low premium of Rs.330 per annum StartUp India works through a multi-layer approach. A)
Simplification and handholding for the Start Ups B) Funding
Pradhan Mantri Suraksha Bima Yojana: Accident Insurance of support and incentives for the Start Up firms c) industry-
Rs.200000/- for a premium of Rs.12 per annum Academia partnership
Atal Pension Yojana: For a small premium, the subscribed, The role of the implementing agencies:
who does not enjoy any pension benefits and belongs to the
unorganized sector. If the development plans launched by the Government should
reach the vast section of the poor and the vulnerable sections
Start Up India: of the country, all the implementing agencies should work in
close coordination. There are many stakeholders - the State
What if your idea is not just an idea? Governments, Government departments, NGOs and the Banks in
What if it sees light? India, who are involved in Poverty eradication.
What if it is really born?
What if you can get someone to believe it? The biggest role in implementation of the Government schemes,
And help you nurture it? is in the hands of the banks in India. Being financiers for the poor
What if you can set a clear path for it? and the vulnerable, Banks face a challenge in poverty removal.
What if it can actually travel? Banks have made the various schemes of the Government – Jan
What if it grows and blooms? DhanYojana, linking Aadhar accounts to the bank accounts,
What if the whole world embraces it? Financing, Start Up India, as successful.
What if your idea is not just an idea?
Concluding remarks:
A very innovative Plan of the Government of India, this scheme
was launched by the Prime Minister in January 2016. On the Uplifting of the poor people and involving them in the Growth
launching of this scheme, PM had said: story of India are national priority. The Government of India
has launched a host of schemes. These schemes have been
Start Up means a Firm, with an annual turnover of not launched with a lot of thoughts and with the collective efforts
more than Rs.25 crores, which is working towards innovation, of the national leaders. There are deficiencies only in the
development, and commercialisation of new products driven by implementation of these schemes. These deficiencies can be
technology. removed if all the implementing agencies work together. Let us
all join hands to make our country strong and sustainable.
“I see Start Ups, technology and innovation as exciting and
effective instruments for India’s transformation".
[email protected]
Articles invited
We invite quality articles and case studies from members in the industry with relevance
to Cost and Management Accountancy, Finance, Management, and Taxation for
publication in the journal. Articles accompanied by color photographs of the author
can be sent to: [email protected]

Interview
What have been the major innovative financial
steps taken during your tenure with this
organization to gain more competitive edge?
To inculcate a visible and positive change in the financial health

of our organization during my span, slightly over two years, a
series of steps with the professional excellence of the different
departments have been adopted. We are working as Team DVC
and I am sure with this cohesive bonding we will go a long way.
Considering the tight financial conditions and shortage of fund,
we have successfully started doing flexible restructuring of
project loans with longer repayment tenure, resulting in reduction
of cash outflow by lowering the repayment of loan and thereby
resultant improvement in cash position. By swapping of loan to
Shri Prabir Kumar Mukhopadhyay a lower interest rate, we could reduce the annual interest burden
vis-a-vis cost of generation. In our endeavor towards adopting a
Member (Finance) loss minimization strategy vis-a-vis maximization of the capacity
utilization, DVC started selling short term unallocated power at
Damodar Valley Corporation a lower competitive rate by recovering a part of its fixed charges
which were otherwise not recoverable.
We have conceived the idea of developing finance module in

implementation of EBA (Enterprise Business Application) for
better budgetary review, cost monitoring and control. It was
our vision to introduce activity based planning and budgeting
for a longer tenure perspective (initially for 3 years). We have
approached the financial institutions to support DVC in improving
our credit rating so as to achieve raising of funds at a lower interest
rate. We have introduced implementation of Strategic Business
Units and Profit Centers for generating units, transmission system
and distribution network enabling better performance evaluation
and strategic decisions. In the process DVC have decommissioned
Durgapur TPS Unit # 3 and Chandrapura TPS Unit # 1 being
uneconomical.
We are very much pro-active on improvement of timely

collection of dues. In process DVC could realize the reconciled
dues amounting to Rs. 4770 Crore on 31.03.2016 under UDAY
Scheme. Also the flexible payment terms for defaulting HT
Consumers to recover past dues with regular payment of present
dues have been achieved. As fuel cost constitutes the main
ingredient of overall expenditure for generation of electricity,
a major reduction of cost through coal linkage rationalization,
reduction of washing recovery charges, reduction in engine
demurrage charges have been achieved with concerted efforts
and consequently there was mentionable reduction in specific
coal consumption.
What are Damodar Valley Corporation’s (DVC)

priorities for this fiscal year to sustain growth in

this industry? in the country? What are the opportunities and
challenges in this business today?
DVC’s first goal is to be and remain competitive in power market.
Electricity is now a commodity and market demands cheap I could foresee that gradually generation of power by the use
and reliable power. DVC undertook the following cost control of different fossil fuels will be replaced by use of renewable
measures to reduce the generation cost without compromising energy. Ultimately in due course the renewable energy shall
the quality. become largest power generating capacity. Besides other green
sources like wind, biomass, small hydro etc. solar power shall
(a) DVC is able to reap the benefits of flushing of funds in the dominate its share in the total capacity. DVC has geographical
banks due to demonetization and to borrow funds at a advantage for setting up solar plants due to longer summer
cheaper interest rate. months particularly in West Bengal and Jharkhand. Since Thermal
(b) By restoring improved O&M functioning through planned generation will gradually lose its share in the total generation
overhauling, inventory and spares management (common capacity throughout the country, DVC has to gradually shift its
pool spare), implementation of technical audit, failure focus in capacity building through renewable energy like Pump
analysis recommendation, energy efficiency measures could Hydro Storage Units (to meet the peak demand) and mainly to
reduce the O&M cost substantially and progressively. set up solar projects. DVC already setup roof top solar plant in
(c) DVC’s another priority area is to improve the availability of DVC Towers to meet the electricity requirement of its head office
coal stock and coal security for sustainability. DVC is working building. Old plants which are not economically viable shall be
on development of coal blocks already allotted to DVC to retired in due course.
become self-sufficient and thereby reduction in coal cost.
(d) DVC adopted modern improved Transmission practice like Another greatest potential area of off-grid relates to solar
construction of GI Substation where space is a constraint. technologies. These include solar water heating system, home
DVC undertook renovation and augmentation/ up-gradation and street lighting which includes solar lanterns, solar cooking
of age-old Transmission/ Distribution System/ network to system, solar pumps and small power generating system. Off-
improve the reliability in supply of power. grid component will immensely help remote village electrification
(e) Another priority area is to apply more stress on recovery programme. The greatest challenge is to sustain in the stiff
of power dues and actions for improved net cash inflow. competitive power market. Finally, DVC consider to diversify
In process DVC is constantly exploring the possibilities in allied areas like O&M consultancy, Training in Management
for reduction of interest liability. One of most important Development Programme, Testing Laboratory, etc.
priority of DVC is to have a constant endeavor to reduce the
unallocated surplus capacity by scaling up supply of power The biggest challenge today is introducing the system of
through short term sale and power exchanges and also to flexibility in utilization of domestic coal allotted to states by
improve supply side management through cutting of power independent power producers (IPPs) as per policy decision of
tariff achieved through lower generation cost to become Government of India, Ministry of Power. It means IPPs can bid
more competitive for sustainable growth. DVC being an age for coal allotted to state utilities, a move which GoI feels, will
old corporation also reworking on manpower rationalization lead to more efficient fuel usage, reduce cost of generation by
in line with streamlined verticals. 40-50 paisa/kWh and which in turn will result in huge savings
(f) DVC’s goal is to achieve 100% dry fly utilization. It will generate in fuel cost and supply of cheaper power to the consumers.
income through selling of by-product (ash) and the fund will The mechanism will operate through clubbing together all
be utilized for better ash management and other pollution coal linkages of individual power plants of central generating
control measures. utilities and putting this clubbed quantity under the charge of a
(g) Further DVC’s aim is to reduce T&D Loss through setting ‘Nominated Authority’ who will allocate coal to IPPs whose landed
progressive trajectory. cost of coal at a particular central generating station periphery is
(h) Closing of old & non viable units are also a part of consideration less than the variable cost of generation of that particular central
under strategic decisions. DVC has selected NLC India Limited sector generating station. As a result of it DVC along with other
(formerly Neyveli Lignite Corporation Limited) as its Joint relatively old generating stations will face an existential challenge
Venture partner for Raghunathpur Thermal Power Station to principally because the variable cost element of DVC power is
reduce its debt burden and also to utilize unallocated power. very high. If this situation is not immediately addressed, this will
mean that once the ‘Nominated Authority’ as planned by GoI,
Ten years down the line, what changes do becomes a reality, DVC will have to buy power from IPPs closing
you see in power generation and transmission

INTERVIEW
its own generating units. We have already instituted various steps to solar and other renewable energy sources to survive in the
to bring down the ‘variable cost’ element of DVC power. To sustain competition by producing electricity at a very competitive cost.
the competition, DVC generating stations are to be able to supply
power to our consumers at a price comparable to the price of What are the major strategies undertaken by your
power supplied by the most efficient IPPs. company to bring in cost competitiveness?
Who are your strong competitors in this business? DVC have taken up lot of actions to become more competitive.
What are your future projections to attain market DVC has taken several cost control measures in recent times to
share against your competitors? bring down the Power Tariff which have two components namely
Energy Charges and Fixed Charges. DVC acted on both the front.
The main disadvantage of DVC is that it does not have any
super critical/ ultra-super critical Thermal Power Stations. The (i) In order to ensure cheaper power, DVC have initiated measures
competitors having such modern super critical plants have an for reduction of fuel costs and consumption viz. coal
edge over DVC in terms of low cost of generation and low carbon linkage rationalization, improvement in coal quality through
emission. We have to compete with them to survive which itself engagement of reputed Government agency for coal sampling
is a big challenge for DVC. to arrest the grade slippage. Also actions have been taken to
reduce the transit loss, grade slippage, demurrage etc. Coal
DVC at present is not considering for any expansion in thermal sources have been identified for cheaper supply. By bringing
sector and shall explore into mainly in solar, pumped storage down washing recovery charges generation cost has been
hydro (to meet the peak demand) or other form of renewable reduced. As a system improvement DVC has incorporated
energy in due course of time which will be altogether a different GPS/ RIFD in all its coal and transportation contract.
ball game for us. However, DVC has geographical advantage of (ii) DVC has already launched PRAGATI to identify the process
enough solar potential which will give a definite edge over its gaps, implementation of systems and standardization of
competitors. process through adoption of improved O&M practices to
ensure reliability and sustainability.
We apprehend in the short run many households will change (iii) DVC has started reverse bidding in all of its procurement
their sources of power from DVC supply to their own roof top and service contracts. This has resulted into substantial cost
solar energy. Street lighting and Park lighting also be sourced savings.
through solar power. This is on one side is a threat to DVC. But (iv) Besides above, the initiatives have been taken for reducing
their lies an opportunity as well. Many of households and other interest cost of working capital. Timely completion of existing
may not have sufficient storing capacity and they may like to projects to avoid/reduce Interest During Construction
inject their excess generation of solar power to DVC grid. DVC (IDC), efficient & effective O&M practices, organization
may utilize the power for building reserve in the pump storage restructuring & automation, manpower rationalization in
mode and may cater to the need of those households and other line with restructured verticals, retiring of old uneconomical
local bodies. In this process we will be able to meet the demand units, augmentation/upgrading age old transmission system/
at evening peak. This shall become a win-win situation for both network to improve reliability.
to consumers and DVC. (v) Finally, DVC is putting efforts for accounting System
up-gradation by implementation of EBA. Also monthly
Do you see foreign companies as a threat to the review and monitoring of cost through budgetary control and
power sector in India? activity based planning and budgeting for a longer tenure
perspective are amongst the major strategies undertaken by
In general in the generation sector, I feel that the impact of DVC to become more cost effective.
foreign investment is not a bigger threat in view of huge capacity
addition programme. But the equipment manufacturing sector How do you ensure eco-friendly activities of the
have badly been affected by the foreign equipment manufacturer. company?
The indigenous equipment manufacturer are facing difficulty in
retaining their market share. Finally, foreign investments are DVC Act, 1948 mandates several ecofriendly activities like
coming in a bigger way in the renewable energy sector mainly at afforestation & soil conservation, flood control, irrigation and
wind and solar which is a future trend in the power sector. Indian waters supply management in the command area. Since its
companies now in thermal generation are to shift their focus inception DVC is carrying out such activities. Also DVC has

established Environment Management & Pollution Control body in India specialising exclusively in Cost and Management
(EM&PC) cell at Head Quarter and field level for monitoring Accountancy. Cost and Management Accountants’ core
environmental parameters laid down by Ministry of Environment competence is in Strategic cost management which is an approach
and Forest (MoEF)/ Central Pollution Control Board (CPCB). to management accounting that explicitly highlights strategic
Stack Emission Control, Effluent Discharge Control, Ambient issues and concerns. It sets cost analysis in a broader context in
Air Quality, Solid Waste Management, Hazardous Waste and which cost information is used to develop superior strategies. A
e-waste management. DVC also undertook afforestation/green sophisticated understanding of the firm’s cost structure can go a
belt programme at lower valley. DVC has also implemented long way in the search for sustainable competitive advantage. The
afforestation work in its own area on degraded forest land. expertise of The Institute of Cost Accountants of India and power
sector professionals of DVC can be brought into one platform
What kind of cost control measures have you by organising seminars/ workshops and thereby roadmap can
taken to ward off the threat from the sudden and be chalked out jointly for better performance and to remain
swift economic slump? competitive.
Slower economic growth will affect the growth for demand What are the various ways your organization can
for power and thereby result in more surplus capacity. DVC integrate with the Institute for the diverse avenues
has already adopted aggressive approach to reduce the surplus in professional development matters?
capacity by arranging adequate power purchase agreements, scale
up supply of power through short term sale and power exchanges There are many ways DVC can integrate with the Institute of
and improve supply side management through cutting of power Cost Accountants of India for the diverse avenues in professional
tariff achieved through lower generation cost to become more development matters. The lists are illustrative but not exhaustive.
competitive in the market. This will help to combat the challenges The most important is sharing of experiences through seminar/
facing the organization in a highly competitive power market. workshops on issues pertaining to power sector. Arranging
With the flushing of funds in the banks due to demonetization, training programme on relevant topics like GST in power sector,
we will certainly explore further reduction of interest rate. Strategic cost management, Fuel cost analysis, Cost rules in
electricity sector etc. may immensely help DVC executives to
How could proper Cost Management system play perform better. Case study in electricity sector is another area
an important role in the overall growth of this to share the problem and solutions. Writing articles in the
sector in India? Management Accountant Journal is also a constructive way to
share experience. Attending workshops on MDP organized by
Cost is one of the most important factor plays a vital role in the MARF by specialized trainer also give a chance for personal
existence of the organization in a buyers’ driven market. When a interaction with experts on different topics. Finally the institute
proper Cost Management System is integrated in the system, the may be engaged to study the present costing system in vogue in
decision making process becomes most objective. DVC operates DVC and suggest improvement in a time bound manner.
in a most competitive environment in Power Sector. Proper cost
control and cost management gives the needed edge in the As a token of advice to our young CMA achievers,
competition. Cost management measures directly impacts on kindly mention at least 3 qualities that they must
power tariff and since consumers have choice to select its source possess to excel in their career.
through open access, the full capacity utilization can be achieved
through apt strategic decisions. DVC has plan to gainfully use the My advice that every young CMA achievers should possess
expertise of The Institute of Cost Accountants of India for their these three qualities to excel in their career:
functioning.
 You should have a clear vision with a definite roadmap.
What roles could professionals like Cost and
Management Accountants play to assist your  You are to be innovative and positive to achieve your
organization in enhancing performance and goal.
competitiveness?
 You should maximize your efficiency through team work.
The Institute of Cost Accountants of India is the only
recognised statutory professional organisation and licensing

REAL ESTATE
REAL ESTATE INDUSTRY - CURRENT SCENERIO

Overview, financIAL modelling,
ERP enabled cost information
CMA D.L.S.Sreshti
Independent Director CMA DR G.V. Narasimha Rao
Sreshti & Associates Cost Accountent Former Sr. Vice President
Former Council Member, ICAI-CMA Soma Enterprise
Hyderabad

“We shape our buildings; thereafter they shape us” –
Winston Churchill
Construction Industry in India State governments under various subsidised schemes. Luxury
Real Estate Industry is part of Construction Industry. houses are on top of the pyramid. Affordable, premium and
Nation’s integrated development encompasses highways, all other social infrastructure initiatives are in the hands
roads, airports, water supply, sewerage, drainage, hospitals, of private sector in addition to Luxury houses/ Villas/
schools, townships, convention centres, houses etc. In short, condominiums. Big players in private sector are Corporate
construction becomes the basic input for socio economic builders who have developed their own brands.
development of any nation. About 300 industries like Competition among state governments
cement, steel, mining, electrical, plumbing are linked to and
State governments are competing to attract investments
support the construction industry. Construction industry
in various industries and services sectors by offering various
though pretty fragmented significantly contributes to GDP,
fiscal and other incentives and show casing cities with social
both directly and indirectly. An interesting fact which the
infra. Land is provided either free of cost or at concessional
Governments cannot ignore is creation of vast potential the
rates for setting up convention centres, sports complexes
construction industry offering employment to 33 million, next
etc. in BOT, BOOT and other innovative modes. In recently
only to agriculture, employing one of the largest section of
held World Economic Forum at Davos, JLL City Momentum
skilled workers.
Index 2017 was announced with a list of most dynamic cities
Growth potential of Construction Industry and Real worldwide based on 42 parameters. 6 cities in India rank
Estate among top 30 worldwide - Bangalore (Rank 1), Hyderabad
(5), Pune (10), Chennai (11), Delhi (23), and Mumbai (25).
Construction industry will remain buoyant due to increased
State governments are unable to create new cities and hence
demand from real estate and infrastructure projects.
prefer to expand the existing cities.
Growth rate for GDP in construction is expected @ 8.1%.
An investment of USD 650 billions in urban infrastructure Game changers for Real Estate industry:
is estimated over next 20 years. The Government of India’s
 De-monetisation of higher currency Rs 500 & 1000
new urban development mission includes development of 100
(Announced on 8th Nov 2016)
Smart cities, 500 Amrut cities which will invite an investment
of 2 Trillion rupees in the next 5 years. Swatch Bharat Mission  Government’s policy on “Housing for all by 2022” and
in urban areas will invite an investment of 0.62 Trillion “Smart City Projects”
rupees. 100% Foreign Direct Investment is permitted through  Real Estate Regulation Act, 2016 (RERA)
automatic route for townships and cities. Urban development  Goods and Services Tax Act, 2016 (Rolling out expected
show cases the growth of a country to attract investments in on 1st July 2017)
industry.
De-monetisation of higher currency: De-monetisation
Growth drivers of Real Estate: impact on construction industry is very short term and more
seen in un-organised sector. Due to high liquidity available
India has estimated urban housing shortage of 20 million
in banking sector, post de-monetisation, interest rates are
dwelling units. The housing shortage in rural India is about
bound to head southward. Builders can obtain debt at
47 million units. Present level of urban infrastructure is
affordable interest rates and a virtual boost to Individuals
inadequate to meet the demands of existing urban population.
opting for housing loans. Simultaneously, Banks will keep
Information technology infrastructure is the engine for
interest on fixed deposits lower than before forcing alternative
development conforming to international standards. Young
investment options which include substantial investments
generation in IT sector and world class institutions prefer to
in real estate. The demand for construction industry is
live in urban areas with well developed social infrastructure
dependent upon the availability of housing loans to buyers
which includes airport, hotels, malls, entertainment places,
at affordable interest coupled with favourable Government
art and culture centres, clubs, education, banking, medical,
decisions prioritising infrastructure industry. In addition, as
hospitality, golf course, conducive environment etc.
a result of the de-monetisation, the prices of Real Estate have
Players in Real Estate already started to settle down from the exorbitant price range
Dwelling types with reference to facilities and finance can to a reasonable market driven prices in some key cities.
be presented in a pyramidal way. Bottom of the pyramid are Real Estate Regulation Act, 2016 (RERA): The RERA
Economically Weaker Section and Low Income Group housing announced by the Central government has to be adopted by
and are in highest demand. These EWS and LIG dwelling all State Governments by way of state enactments before May
constructions are taken up by the Central government and 2017. This enactment makes the Builders more accountable,

R E A L E S TAT E
transparent and enforces governance respect of major manufactured inputs and realizes sales consideration from
among other things. This enactment is like steel, cement, plumbing, electrical Builder’s portion of 50%-60% of saleable
customer focussed to protect their rights. etc and also logistic costs may benefit space.
A major benefit for consumers included in the Construction Industry. The GST rate In case customer advances are not
the Act is that builders will have to quote proposed on manufacturing goods is likely coming forward in time, then Builder
prices based on carpet area and not super to be 18%. But, direct impact of GST on has to raise bridge loans/Inter corporate
built-up area, while carpet area has been Construction Industry is yet to be clear. deposits resulting in increase in interest
clearly defined in the Act to include usable However, the rating agency ICRA opined component. In order to attract more cash
spaces like kitchen and toilets. that Real Estate would attract 18% and its flows from customers at initial stage itself,
Builders ought to take prior registration impact on housing prices would be broadly a Builder may, at his option offer discount
from RERA. For failure to register, a neutral. in sale price.
penalty of up to 10 percent of the project Salient features of Real Estate Another circumstance, where a Builder
cost or three years’ imprisonment may be under pressure is on account of un-sold
imposed. The industry is capital intensive and the
construction periods vary from medium inventory. Builder is under obligation to
The cost of construction is likely to go to long term. For example, to construct complete the project as per promised
up by about 15% to comply with norms, a residential building of 5 floors with schedule notwithstanding sale status. It is
scheduled delivery, penalty for belated parking space generally takes 18 months. not out of place to come across situations
delay, legal processes etc. The cost Beyond 5 floors, each additional floor where a Builder had offered incentives
increase for implementing the norms takes 1.5 month. That means a 21 storied like free Modular Kitchen or free furniture,
under RERA may impact supply side. building in the normal course requires a Price Guard guaranteeing against fall in
Small time Builders may withdraw from construction period of 3.5 years. Cost of prices, Property maintenance services like
the real estate business as norms under construction goes up in high rise buildings finding tenants, collection of rents etc.
RERA becomes difficult to implement. beyond 5 floors prompting the builders to There were occasions where Builders have
Unless the builders come to terms to fix enhanced sales price for higher floors. changed plans from premium to ordinary,
make available their services consistent big size to small size for new Blocks in
The cost of construction is highly the initial drawing stage itself and made
with the objectives set forth in RERA, influenced by land cost which constitutes
their name in the market as it stands today affordable as market condition change
30% to 50% according to city, location due to external reasons of political or
cannot continue and all players have to and environment. The next influencing
necessarily adopt effective planning, increase in the number of players around
factors on cost are quality of construction, the area.
budgeting, scheduling, safety norms facilities offered, value addition services
keeping the environment in view, logistics like gym, club house, swimming pool, golf Marketing activity, strictly speaking, can
etc. So, past glories will not be the sole course etc. only commence after obtaining regulatory
criteria for Builders in financial modelling permissions. Own funds are required for
after RERA. A major beneficiary of the Funds for Real Estate: purchase of land, drawings preparation
RERA is the genuine home buyers, who are Builder pools funds for construction by architect, regulatory fees, pre-operative
well protected by the various clauses that from own sources, customer advances and and preliminary project expenses and
are customer focussed, avoiding costly banks / financial institutions. Customer’s brochure preparation.
and time consuming grievance redress margin is 20% of sale price as banks are Construction equipment is either
measures that were existing before RERA. disbursing loan to a max of 80%. Bank procured on outright purchase in case
Goods and Services Tax finances upto a max of 40% to the Builder the order position is excellent or taken on
in last leg after initial funding is made by lease at various stages, like initial land
Presently, the Service Tax on sale of Builder and customers. development, construction of the space
space when under construction will etc.
attract 3.75% considering abetment of Joint development model, instead of
75%. VAT on works contract is 1% in some outright purchase of land, is picking up as Most Builders have suffered from
states and higher tax in some other states. this route is providing win-win situation time-over-run and cost-over-run for
Put together, both taxes come to 4.75% to Land Owner and Builder. Builder may various reasons. Time-over-run may be
or higher percentage depending on VAT pay some advance of 10% and sometimes due to delay in approvals by various
rate. Under present GST law, an input tax a good will at the time of execution of regulatory authorities, non- availability
credit shall not be available in respect Development agreement and balance in of resources, eg. sand in recent times was
of “goods and/or services acquired by shape of completed constructed space. not allowed due to change in Mining Act,
the principal in the execution of WORKS The share in constructed space to Land delays in construction etc. Cost-over-run
CONTRACT when such contract results Owner may range from 40% to 50% of may be due to price changes in basic
in construction of immovable property”. total constructed space depending upon commodities like cement, steel; increase
However, any possible reduction in land value. That means, Builder will incur in minimum wage under regulations.
costs on implementation of GST in total project/construction cost of 100% Builder may not be able to recover

additional costs incurred from the customers unless market  “Ready- for- construction-drawing” is the first document
improves and higher sales realizations are achieved. Hence, uploaded in Real Estate ERP from which are drawn various
meticulous planning and strict implementation of the project activities, work flow, resources required.
are the ‘mantras’ to avoid cost escalations. Real Estate ERPs are  “Work-breakdown-structure” (WBS) is prepared from the
available to monitor projects and mitigate or minimise the above “Ready- for- construction-drawing”.
issues.
 “Expenditure budget” is fixed by the management out
Customer base and perceptions: of their experience based on what kind of quality
The volume game is more in affordable segment with 2-3 bed construction is required. This covers direct expenses and
room of 1000- 1500 sft in saleable price range of Rs.40 lakhs to not overhead expenditure.
Rs. 60 lakhs (Approximate price in fair locality at Hyderabad –  “Bill of quantities” (BOQ) hierarchy is drawn from WBS.
may vary from place to place). BOQ is drawn for various material (steel, cement, doors,
Premium apartments 3-4 bed room with 1500 to 2000 sft windows, electrical, plumbing, finishes), for labour
may cost in the range of Rs. 75 lakhs to Rs.100 lakhs. Luxury resources (mason team, plumbing team, electrical team)
independent house may cost Rs.2 crores and above depending and for equipment.
upon land area, built up area and amenities etc.. Ultra luxury  “Procurement prices” are worked for all inputs through
house costs more and is customer specific. Bank/Institutional various methods. One example is by considering 4
funds are available to Individuals on long term loan upto 80% pessimistic prices + 2 optimistic prices / 6. Inflation is
coupled with Income Tax benefits. Individuals from IT and other considered over a period of construction.
highly paid sectors are purchasing houses at youngest age due  “Estimates” are prepared based on BOQs and Procurement
to high savings and availability of loans at attractive interest prices. Estimates are different from Expenditure budget.
rates.
 “Functional Activities” are related to time schedules and
Customer perception in selecting a house/apartment is broadly drawn a PERT CPM chart.
based on – Environment, neighbourhood and proximity to work
 “Daily physical progress” is mapped with PERT CPM charts
place/education institutions; Builder’s good will and track record;
and redrawn the critical path based on progress.
features & quality of house/apartment; pricing and payment
stages.  “Work orders” are issued under Procurement Module
subject to a limit of Estimates.
Financial modelling:  ERP relates one-on-one and thereby has a built in control
Involves fundamentally: mechanism. Eg Software will not allow Procurements
 Ascertaining the net present value of future cash flow beyond BOQs. BOQs are not allowed beyond Estimates.
streams. Estimates are not allowed beyond Expenditure budget.
Changes if any are required are through amendments by
 Preparing Model finance sheet with sound and practical
management approval.
assumptions current and reliable.
 Each “Project” is given a code. “Sub-project” codes are given
 Internal rate of return, good mix of debt and equity, real
if one project has many blocks. Each “unit of apartment”
estate taxation norms in force etc.
is given another code.“ Thereby, resources allocation can
 Grasp of basic financial principles – risk and return, NPV, be made as per the codes.
various interest and discount rates, capital structure, cost
of capital etc. Conclusion
 Building area assumptions. In times to come, Real Estate Industry is bound to boom.
 Key project parameters. Affordable interest rates for Customers will continue. More
housing schemes are likely to be taken up to ease the shortage
 Capex vs leasing options for equipment. for the second most populous country. Builders employing
 Debt and interest schedule – drawdown and repayment. technology, trained workforce, innovation, maintaining quality
 Procurement of different materials, assignment of works and timely delivery will remain in the market. Financial discipline
to sub-contractors, man management and financial is sine qua non for managing the investments seamless.
resources from time to time.
References
 Various regulatory approvals and returns to be filed.
1. www.makeinindia.com/sector/construction
 Sale of space and stage-wise receipts.
2. www.credai.org;
 Taxation structure.
 Review and revision of Cash flow statements periodically.
 Finally, the return on investment Vs estimates. [email protected]
ERP enabled project-wise Cost information [email protected]

DEMONETISATION
Demonetisation & its impact on
Indian Economy
Dr Pankaj Kumar Roy

Principal
Jogesh Chandra Chaudhuri College
Kolkata
Does Demonetisation usher in any hope in the minds of million and millions of Indians? Debate is going on. According
to Irving Fisher’s Quantity Theory of Money in the short run money supply will fall, demand will be sluggish and
people will lose jobs . On Consideration of the empirical figures it revealed that the effect is not very pronounced but
Indian economy is steadily progressing on a journey towards more ethical economy.
Demonetization is the act of stripping a currency unit of its “ In our country politics dominates leads over economics. 87% of
status as legal tender. It occurs whenever there is a change of Indian economy is cash driven i.e. informal, black money is also
national currency: The current form or forms of money is pulled mounting day by day. To increase the tax base and to prevent the
from circulation and retired, often to be replaced with new notes future black money, digitalisation is the need of the hour.
or coins. The objective of this paper is to highlight the causes and
effects of demonetisation on Indian economy. India has had a previous history of digitalisation in the years
1946, 1954 and 1978. In 1917 erstwhile the USSR had advocated
According to the Quantity Theory of Money of Irving Fisher, demonetisation after Rush Revolution, after World War II
if the amount of money supply in the economy doubles, price Germany had taken the path of demonetisation. The only other
levels also double, causing inflation. The consumer pays twice for demonetisation exercises in recent times where in Russia after the
the same amount of goods or services. On other way round we break up of erstwhile Soviet Union and in Libya after the fall of
may say that if the money supply falls the demand will fall and the Gaddafi Regime. The demonetisation decision has four main
inflation will cool down. objectives:
US economist Keneth Rogoff describes the misery of cash in his Unearth stashed cash ;
book “The curse of cash “. Federal Bank of America has withdrawn Collect tax from this cash ;
the high value Treasury bill phase by phase. Cash ban is a poll Stop Black money flow and
promise of the NDA Government. A Government always comes Segregate Fake Currency.
in power on the basis of political and economic agenda but the
Government always sustains on the basis of economic agenda. The question is whether India is ready to accept digital
One is reminded of Eugene Bear’s famous pronouncement, “Good economy? At present 54 % of the Indian population have bank
economics is a bad politics and bad economics is a good politics. accounts, number of bank branches in India is 1.32 lakhs ,

number of ATM is 2.2 lakhs , 1.25 lakhs Post Offices will also help finance terrorism, as per reports of National Investigating Agency
and expedite digital payment . Different e-wallets like Pay tm , (NIA). Demonetisation is an important issue as it brings people
Pay Umoney, MobiKNIk , Citrus Pay , SBI’s Buddy , Videophone into moral economy. Short term pain will definitely pave the way
MPaisa ,Citi Master pass , ICICI Banks’ Pockets , SBI Mobi cash to long term gain. In this context one is reminded observation
and Airtel Payments Bank are part of the great digital march . As of George Bernard Shaw’s observation , “Progress is impossible
per study of the Zinnov Consultancy Group Study , 2016 , by the without change, and those who cannot change their minds can’t
year 2023 the digital transactions will exceed cash transactions. change anything. “
The following table presents a graphic representation of the facts.
In India , 1.95 crore people belong to the income bracket 2.5
Table – I Digital and Cash Transaction over the Years lakh to Rs 5 lakh , 52 lakh people belong to the income bracket Rs
5 lakh to Rs 10 lakhs . Only 24.5 lakh citizens submitted returns
Year Cash Digital
to the Income Tax Department showing income more than Rs
2005 92 8 10 lakh , as Global Indian as per McKinney International Study .
However , you know what has happened in the first 52 days of
2010 89 11
demonetisation? Deposit in 25.85 crore Jan Dhan Account (closer
2015 78 22 to BPL people) have amounted to a total of Rs 87,000 crore.
2020 60 40 Loan repayment in cash (over Rs 25 lakh ) was made in 1.17 lakh
accounts amounting to Rs 49,720 crore . Total deposit of 10.38
2025 41 59 lakh crore was made in 1.1048 crore accounts, deposit in each
Source: Zinnov Consultancy Group Study, 2016 account was more than Rs 2 lakhs . In the year 2002-03 the
number of tax payers was 2.7 crores when population was 100
Google –Boston Consultancy Group had conducted another crores , now in the year 2014-15 the number of tax payers come
study on digital India in the year 2016. As per the data recorded down to 1.9 crores although the population has grown to 130
in this study India is moving towards digitalisation steadily. crores .
Table II Mobile user with Population over the Years It is to be noted that in the year 2000 currency in circulation
was Rs 1, 69,000 crores which has increased to Rs16, 50,000
Items 2015 ( in cr) 2020 (in cr) crores , an increase of nearly 9.7 times was recorded in 15 years.
India has physical cash circulation of 16, 50,000 crores of which
Population 125 130 86 % is Rs 500 and Rs 1,000 denomination notes. It is Interesting
Mobile User 105 120 to note that Rs 500 denomination notes circulation went up by
76% from 2011 to 2016 and within the same period Rs 1,000
Internet User 34.5 65 denomination notes by 109% as against 40% increase in currency
Smart Phone User 24 52 notes. In such a gloomy situation inflation flair up, income
disparity goes up and parallel economy is on the driving wheel.
Source : Google –Boston Consultancy Group ,2016
It is true that black money finds its own way in real estate, stock
The revolutionary move of demonetisation was appreciated market and bullion market. India is following digital economy as
by world base organizations like World Bank, IMF, and Moody’s, it has world’s largest graduate population, computer literate and
Standard and Poor, Global Times of China and many eminent English speaking population with a rising young population than
economists like Prof Jagdish Bhagwati, Professor Colombia that of China.
University, V.K. Klamath, Chief of BRICS Bank, Nobel Laureate
Ja Tirol. In the words of Peter Ustinov, “Corruption is nature’s way
restoring our faith in democracy. “Out of 15.44 lakhs high value
Fake Indian Currency Notes (FICN) figure was disclosed in the currency in circulation, Rs 14 lakhs cr high value currency was
Parliament in 2006-07 reveals that 7.34 lakhs of Rs 100 notes, desperately deposited within 52 days. It would result in a fall in
5.76 lakhs of Rs 500 notes and 1.09 lakhs of Rs 1,00 notes were RBI’s liability and translate into windfall gains of the government.
fake . The Parliamentary Panel was informed that the volume of At present the results are not as per expectation but eventually
FINC smuggled into India in 2010 was between Rs 1,500 cr and it is bound to increase. In the mean while with in the stipulated
Rs 1,700 cr which went up to Rs 2,500 cr in 2012 i.e. rise of 55% 52 days the supply of new currency by the end of December,
is clearly indicated . Fake currency notes were rampantly used to 2016 amounted to Rs 6.9 lakh crores , within 80 days by the end

D E M O N E T I S AT I O N
of January, 2017 newly supplied currency amounted to Rs 10.3 Retail inflation has cooled down to a 5 year low of 3.2 % in
lakhs crores and by the end of February, 2017 it will be Rs 12 lakh January, 2017 compared with 5.7 % in January ,2017 . Rural areas
crores to Rs 13 lakh crores . Normalcy does not indicate complete have witnessed a slightly higher inflation rate at 3.4 %, while in
replacement of currency. That too is to be treated as an abnormal urban areas it was 2.9 %.
situation, which the country not deserves.
A study conducted by Oxfam has revealed that in India 1% of
As a result of the fact that after the initial round of scrutiny the people holds 58% of the wealth. The Tax paying pattern also
on” Suspect “ deposits in 18 lakhs accounts were identified where reaffirms the same. However, the true picture of income does find
Rs 5 lakhs and above were deposited and the stack added up reflection in IT files.
nearly Rs 4.2 lakhs crores for which initially e-mails and SMSs
were subsequently sent out for clarification . Out of 18 lakhs Table – V Income Inequality
identified account holders, 5.27 lakhs were login website and out % of Tax
of these login accounts 60,000 people agreed to pay tax and Range of Income No of People
Payer
penalty as stated by CBDT Chairman. The first three objectives
of demonetisation are unearthing stashed cash, collection of Rs 2.5 lakhs to Rs 10 lakhs 3.4 cr 93.3
tax from this cash and minimising black money flow in future.
Rs 10 lakhs to Rs 1 cr 24 lakhs 6.6
Baijayant Joy Panda in an article entitled “ Cheques and
Balances’ has pointed out that , “ As of the last year ; the tally
More than Rs 1 cr 48,000 0.1
of disputed cases was nearly 87, 000 in the Supreme and High
Courts , 1.53 lakh in the income Tax appellate Tribunals and 3.7 Source: The Times of India dated t 1/01/2017
lakh with Income Tax Commissions ( Appeals ). “
A study of the deposit pattern within the period of
Questions will certainly arise as to the possible effects of demonetisation , and tax-payers’ status reveal that tax net
demonetisation on Indian economy .Expected GDP growth rate of should be widened in order to generate more revenue as direct
India in coming years will gradually be neutralised and economy tax component and to improve the direct tax to indirect tax ratio
will regain its momentum . Initially GDP will come down then better and Income Tax to GDP ratio be more reasonable.
again it will rise .
WB opposed demonetisation vividly on the plea that the
Table – III Effect on Economy revenue generation would passively come down by Rs 5,500
crores but actually it went down only by Rs 1,847 crores in
Year GDP Growth Rate
comparison with last year short fall of Rs 4,000 . The Politicians
2016-17 GDP 7.6% to 7 % are also having a hue and cry that cultivation will be tremendously
affected. The Area covered under cultivation of Rabi crops
2017-18 GDP 7.6%
has showed no support in favour of the negative argument of
2018-19 GDP 7.8% politicians. The following figure illustrates the fact that the
Source: IMF country is looking at the prospect of having the highest acreage
of winter crops in five years.
While economists in India are discussing a growth rate of 7% ,
world has witnessed a different picture. World trade decline, 7% Table – VI Defying Demonetisation
growth rate is harder to achieve not because of demonetisation 2012- 2013- 2014- 2015- 2016-
but because of de-globalisation as per the study made by Morgan Year
13 14 15 16 17
Stanley Investment Management.
Area in
Table – IV Number of Countries Achieving 7% GDP Lakh 608.65 642.89 596.24 600.02 637.34
Hectares
No of Countries 50 25 6 Source: The Times of India 27/01/2017
The government plans to make it mandatory for payment to
Year 2003-07 2008-15 2016
be made only through cheque or directly into the bank account
Source : Morgan Stanley Investment Management of the concerned beneficiaries. In the same line the Payment of

In the words of Peter Ustinov, “Corruption is nature’s way restoring our faith in democracy".
Wages (Amendment) Act, 2017 has been made so that poor labourers are not deprived from their minimum wages.
Let us take a quick look at the agriculture, industry and service sectors. In spite of demonetisation, agriculture growth rate has not
fallen but has not risen as expected.
Table – VII Agriculture Sector
Year 2012-13 2013-14 2014-15 2015-16 2016-17
Agricultural growth Rate 15.% 4.2% (-) 0.2% 1.1% 4.1%

Source: RBI
Informal sector has been affected in the short run but regaining momentum gradually. Overall industrial growth rate has come down
in comparison with earlier estimation.
Table – VIII Industrial Sector
Year 2012-13 2013-14 2014-15 2015-16 2016-17

Industrial growth Rate 1.% -0.1% 2.8% 3.1% 4.8 %
Source: RBI
Service sector growth rate is slightly down compared to earlier years.
Table – IX Service Sector
Year 2012-13 2013-14 2014-15 2015-16 2016-17

Service Sector growth Rate NA 7.8% 10.3% 9.2% 8.9%
Source: RBI
December ,2016
Conclusion 2. Kar Saibal , Demonetization , The Management Accountant ,
Vol 52 , No 2 , February ,2017
Indian economy has enough strength to absorb the 3. Keynes J M (1936) , The General Theory of Employment ,
commencement of demonetisation. It has trembled but not fallen Interest and Money , Palgrave Mc Millon , 1936
as apprehended by the critics of demonetisation. 4. Panda Baijayant Joy –Cheques and Balances , The Times of
India , February 15,2017 , p 16
The Union Budget proclaimed the avowed aim of the Honourable 5. Google –Bvoston Consultancy Group Report , 2016
Finance Minister Mr Arun Jaitly to widen the tax net by reducing 6. Mckensay International Report, 2005
7. Zinnov Consultancy Research Report , 2016
the tax rate in the first slab and not by enhancing the exemption
8. www.allonmoney.com
limit. The glaring thrust on agriculture, rural development and
9. www.indiaspend.com on History of Demonetisation
infrastructure reminds us of the pronouncements of Lord Keynes 10. India Today , issue pubished on 14the November ,2016
in the event of the Great Depression in the 1930s in USA , “ The 11. The Times of India Different issues
government should pay people to dig holes in the ground and 12. The Statesman Different Issues
then fill them up" . 13. Eai Samay Different Issues
14. Anandabazar Different Issues
Reference
1. Dasgupta Dipankar, Theoretical Analysis of Demonetisation
,Economic and Political Analysis , Vol51, Issue No 51, 17 [email protected]

COST AUDIT
The Great Indian Experiment
Justification for
Introduction
and Continuation 1
CMA Dr. Bhabatosh Banerjee

Former Professor of Commerce &
Dean of Commerce & Management
University of Calcutta
C
ost Audit is considered as the great Indian  What circumstances did lead to enactment of legal
experiment. India introduced it first among provisions for maintenance of cost accounting records,
all countries of the world. Many Asian and cost audit? How effectively, the ICAI played its role
and African countries followed the Indian in this context?
model subsequently. The Institute of Cost  After the liberalisation of Indian economy in 1991, why
Accountants of India has been playing a were the same legal provisions continued?
very significant role since the Government  Are the provisions of the Companies Act relating to
of India had introduced legal provisions for maintenance of maintenance of cost accounting records and those relating
cost accounting records in case of certain specified groups of to Cost Audit the same prior to economic liberalisation
manufacturing companies and assuming power to order for cost and those contained in the Companies Act, 2013?
audit in certain units within the above-mentioned groups. This
was done by amendment in 1965 of the Companies Act, 1956. The study is of explorative type. Section 2 gives background
of various developments that led to taking decisions by the
In 1991, India liberalised her economic policy. As a result, Government to bring in necessary legislative changes in 1965
competition increased several folds and manufacturing for maintenance of cost accounting records and cost audit. This
enterprises were expected to operate more efficiently. So, market section also gives a brief account of the activities of the Institute
forces started dominating the picture. But the maintenance in this context. This is followed by a brief discussion in Section
of cost accounting records and cost audit continued. In the 3 on liberalisation and its possible impact on the companies
Companies Act, 2013, both the provisions, maintenance of cost so that the Government introduced reforms for enhancing the
accounting records and cost audit, have been retained. usefulness of maintenance of cost accounting records and cost
audit. Section 4 makes a comparison of the legal provisions prior
In view of the above, this paper seeks to address the following to liberalisation (pre-1991) and those enacted in the Companies
issues: Act, 2013 (post-liberalisation). The last section gives summary
and conclusion.

The Early History accordingly in section 149 provisions for compliance of new
The concept of Cost Audit had emerged from the review business were added. The purpose of this amendment was to
of various mal-practices brought to light by the Vivian Bose enable shareholders and other interested parties to have a clear
Enquiry Committee. The financial Audit (sections 224-227 of idea of the main objects clause and the other objects. Therefore,
the previous Companies Act, 1956) at the end of the year was this amendment made it difficult for the management of the
considered insufficient to assess the real efficiency of working companies to pursue any object outside the main objects clause
of manufacturing establishments. As a result, a new concept of without the knowledge and approval of shareholders.
management arose in Government thinking – that it is not only
the shareholders of a company engaged in production, processing The real beginning of Cost Audit, however, started in 1965
etc. industries but Government were equally interested that when the Companies Act, 1956 was amended to incorporate the
resources of the company are used to maximum advantage2. provisions relating to maintenance of Cost Accounting Records
Rules and Cost Audit. Such amendments were made on the basis
The Cohen Committee3 was appointed soon after the Second of recommendations received from Vivian Bose Commission, Dutta
World War to make various recommendations in the then existing Commission and Shastry Committee. As theses Commissions /
company laws. This Committee submitted its report in the year Committees observed inadequacies in the then existing system
1945, making striking proposals for the abolition of the doctrine of financial accounting and audit and also in the then existing
of ultra vires. The Jenkin Committee Report 1962 made its system of corporate disclosures, they recommended an effective
recommendations that the doctrine of ultra vires should not be system of cost accounting and cost audit, to supplement the
repealed, but protection should be given to third parties dealing financial accounting and auditing practices.
with the companies in good faith.
The justification for mandatory Cost Accounting and Cost
In the year 1952, Bhaba Committee4 on this doctrine expressed Audit has been well documented in the Parliamentary debate that
similar view as that of Cohen Committee, in that the doctrine led to adoption of Companies Amendment Bill 1965 incorporating
is merely an illusory protection for the shareholders and pitfall Sections 209 (1) (d) and 233B. During the relevant Rajya Sabha
for third party dealing with the company. This Committee debate, Smt. Tara Ramachandra Sathe (MP from Maharashtra)
recommended the overhauling of the company’s legislation stated as under5.
in the country and on the basis of which a bill was laid before
Parliament in 1953 which, after few modifications, made by Joint The cost audit is quite different from financial audit. It is to see
Select Committee, enacted “The Companies Act 1956” repealing whether the labour is efficient or not, whether labour provided is
the 1913 Act. less than what is required, whether every material and machinery
is used to the optimum. Since we are short of material, it has to
Vivian Bose Commission was appointed to investigate into be imported leading to outgo of foreign exchange. It is therefore
the Dalmia Jain Airways Ltd.’s affairs under the chairmanship of very essential that there should be Cost Audit in almost all the
Justice Vivian Bose. The recommendations of this Commission Industries (Proceedings of Rajya Sabha, 14th September 1965)6.
were later on taken into consideration by Daphatry Shastri
Committee which was presided by Shri A.V. Viswanath Shastri, In his reply, the then Hon’ble Finance Minister, Shri T.T.
an Advocate of Supreme Court, along with Shri C.K. Daphatry, Krishnamachari, while highlighting the absolute necessity of Cost
the then Attorney General. Accounting and Cost Audit stated that:
The Daphatry Shastri Committee gave its recommendations for while we have made it obligatory or rather semi-obligatory
carrying out necessary amendments into the companies act and, to employ cost accountants, it is our intention to ask certain
accordingly, the Amendment Act of 1965 made amendments of industries, to have a cost accountant’s report. We are really
sections 13 and 149. The Committee recommended that clause (c) making it possible for Institution of Cost Accountants to grow
of section 13 of the Act, as it stood before amendment, should so as to enable the Government sometime later to make every
continue to apply to companies in existence immediately before manufacturing company employ a Cost Accountant and have a
the commencement of this Amendment Act of 1965 and the cost acountant’s report in regard to the cost of product that it
provisions of new clauses requiring the division of the objects into produces (ibid; column 3974).
(i) main objects and objects ancillary thereto and (ii) other objects
should apply to the new companies. Thus, by this amendment, The Institute of Cost and Works Accountants of India came
three new clauses, namely (c), (d) and (e), were substituted and into being as a statutory body by an Act of Parliament in 1959.

COST AUDIT
In moving the Cost and Works Accountants Bill the Lok Sabha for fixation of user charges in respect of services provided by
Debates, Vol. XXIV, dated 20th December, 1958, pp. 6608-09 them, revenue department, is of paramount importance which
recorded its importance in the following words7:. would go a long way in fulfilling their respective objectives. One
of the objectives was to bring in cost consciousness among the
The systematic determination of cost in every single and companies with resulting benefits to the stakeholders.
distinct process of manufacturing provides a continuous check on
the margin of waste in the processing of raw and semi-furnished The justification for mandatory cost accounting records
materials, on the utilisation of machinery installed, on manpower and cost audit has been well explained and documented in
expended and the percentage of rejection of finished products. the Notes on clauses, Reports of the Joint Select Committee
This pinpoints also the particular process in which defects and and Parliamentary Debate that led to adoption of Companies
deficiencies exist, thereby enabling immediate remedial measure Amendment Bill, 1965 incorporating above-mentioned Section
being taken. 209(1) (d) and 233B. The primary aim was to make the corporate
sector more efficient through the scheme of detailed cost
Sections 209(1) (d) and 233B of the Companies Act, 1956, accounting and efficiency audit.
incorporated in 1965, are the backbone of cost accounting
and cost audit in the Indian corporate sector. Since then, the It is important to mention here the role of the ICAI in this
framework put into practice inculcated cost consciousness context. The Institute had been submitting to the Government
amongst the industry and also served the requirements of of India, time and again, the need for incorporation of regulatory
regulatory authorities, government agencies, tariff/price provisions in the Companies Act for maintenance of cost
fixation bodies, research organisations, etc. These provisions accounting records in certain specified groups of manufacturing
empowered the Central Government to mandate maintenance industries for enhancing efficiency of these units in terms of
of cost accounting records and audit thereof in certain class of utilisation of resources in a resource-scarce economy and also
companies. The broad objectives were to (i) inculcate a culture making more reliable cost data available for informed decisions.
of cost consciousness among industries; (ii) improve resource So, the dream of the Institute was fulfilled in 1965 through such
management; make efficiency audit possible; and (iii) make cost enactments in the Companies Act, 1956.
data available with the Government.
Empowered with the provisions of the above legislation, the
Under these provisions, from 1966 till 2004, Ministry of erstwhile Institute of Cost and Works Accountants of India
Corporate Affairs [MCA] framed and notified separate Cost started formulating Cost Accounting Record Rules (CARRs).
Accounting Records Rules (CARR) for 44 industries/products. Between 1967 and 2004, it covered 44 industries as shown in
MCA also notified Cost Audit Report Rules which were later table 1. Vested with the powers under section 233B, the Central
amended in 1996 and again in 2001. SSI units with turnover not Government also ordered for audit of cost accounting records in
exceeding Rs.10 crore were granted exemption. Cost audit orders a large number of companies falling within the scope of these 44
were issued on individual companies chosen in as ad hoc manner, industries.
resulting in criticism. Multi-product companies were required to
comply with multiple Rules. Bulky cost audit reports [running into Table 1
500-1500 pages] contained complex details each unit and each
product separately8. List of Cost Accounting Records Rules9
The Committee on Subordinate Legislation (14thLok Sabha) 1. Cost Accounting Records (Cycles) Rules, 1967
went deep into the scope of Statutory Cost Accounting Record 2. Cost Accounting Records (Tyres & Tubes) Rules, 1967
Rules and regretted that even 38 years after enactment of the 3. Cost Accounting Records (Air-Conditioners) Rules, 1967
relevant provisions empowering the Government to prescribe 4. Cost Accounting Records (Refrigerators) Rules, 1967
the Cost Accounting Record Rules, these have not been framed 5. Cost Accounting Records (Batteries other than Dry Cell
to cover all major industry /projects. The slow pace of framing Batteries) Rules, 1967
rules negates the very purpose of the important provisions of 6. Cost Accounting Records (Electric Lamps) Rules, 1967
the legislation passed by the Parliament. The Committee further 7. Cost Accounting Records (Electric Fans) Rules, 1969
mentioned that an authentic cost database to various existing 8. Cost Accounting Records (Electric Motors) Rules, 1969
and new regulatory and development authority, RBI, Competition 9. Cost Accounting Records (Aluminium) Rules, 1972
Commission, various states / central government departments 10. Cost Accounting Records (Vanaspati) Rules, 1972

11. Cost Accounting Records (Bulk Drugs) Rules, 1974 agencies, tariff/price fixation bodies, research organisations, etc.
12. Cost Accounting Records (Jute Goods) Rules, 1975
13. Cost Accounting Records (Paper) Rules, 1975 Cost accounting is an integral part of the management
14. Cost Accounting Records (Rayon) Rules, 1976 process. It serves as an important tool to the management to
15. Cost Accounting Records (Dyes) Rules, 1976 face the growing pressures of global competition, technological
16. Cost Accounting Records (Polyester) Rules, 1977 innovations, volatility in exchange rate and input prices and
17. Cost Accounting Records (Nylon) Rules, 1977 change in business processes. To ensure that the organisation
18. Cost Accounting Records (Textiles) Rules, 1977 remains competitive both for sustenance and growth, cost
19. Cost Accounting Records (Dry Cell Batteries) Rules, 1978 management has moved from a traditional role of product costing
20. Cost Accounting Records (Steel Tubes and Pipes) Rules, to a broader strategic focus. So, the efficient operation of Cost
1984 and Management Accounting in an enterprise assumed greater
21. Cost Accounting Records (Engineering Industries) Rules, significance during post-liberalisation period.
1984
22. Cost Accounting Records (Electric Cables and With the aforesaid objectives in mind, Ministry of Corporate
Conductors) Rules, 1984 Affairs (vide their Order dated 21st January 2008) constituted an
23. Cost Accounting Records (Bearings) Rules, 1985 Expert Group comprising members drawn from the Government,
24. Cost Accounting Records (Formulations) Rules, 1988 Industry Associations and Professional bodies. The Group was
25. Cost Accounting Records (Steel Plant) Rules, 1990 asked to undertake the following tasks:
26. Cost Accounting Records (Insecticides) Rules, 1993
27. Cost Accounting Records (Fertilizers) Rules, 1993 (i) Review the Cost Accounting Record Rules and their
28. Cost Accounting Records (Soaps & Detergents) Rules, 1993 continued relevance in the contemporary competitive
29. Cost Accounting Records (Cosmetics & Toiletries) Rules, environment as per the presently prescribed structure
1993 / format, and make recommendations for requisite
30. Cost Accounting Records (Footwear) Rules, 1996 modifications and / or alternative structures;
31. Cost Accounting Records (Shaving Systems) Rules, 1996 (ii) Review the existing Cost Audit Report Rules and formats
32. Cost Accounting Records (Industrial Gases) Rules, 1996 prescribed therein, and recommend appropriate
33. Cost Accounting Records (Sugar) Rules, 1997 modifications to make them more relevant to the needs
34. Cost Accounting Records (Industrial Alcohol) Rules, 1997 of different stakeholders including company management,
35. Cost Accounting Records (Motor Vehicles) Rules, 1997 shareholders, regulators, etc;
36. Cost Accounting Records (Cement) Rules, 1997 (iii) Review the existing system with a view to making
37. Cost Accounting Records (Milk Food) Rules, 2001 suggestions for addressing the concerns of the industry
38. Cost Accounting Records (Mining and Metallurgy) Rules, with regard to confidentiality of company cost data and
2001 cost of compliance, and
39. Cost Accounting Records (Electronic Products) Rules, 2001 (iv) Review and, if required, give suggestions for redrafting the
40. Cost Accounting Records (Electricity Industry) Rules, 2001 existing Cost Accounting Standards in the Indian context
41. Cost Accounting Records (Plantation Products) Rules, 2002 in light of international best practices, and to align them
42. Cost Accounting Records (Petroleum Industry) Rules, 2002 with the international cost accounting standards issued
43. Cost Accounting Records (Telecommunications) Rules, by International Federation of Accountants (IFAC).
2002
44. Cost Accounting Records (Chemicals) Rules, 2004 The Group noted that, globally, cost accounting system was
Source: http://icmai.in never invented for administered pricing although that might have
been one of the objectives prior to liberalisation of economic
Reforms for Enhancing Usefulness of Cost Audit Etc. policies in India particularly in case of Central Public Enterprises.
In Post-Liberalisation Era The domain of cost accounting has enhanced and enriched for
Since 1965, the framework put to practice has inculcated a driving the performance amidst global competition. This requires
sense of cost consciousness in a large number of industries/ comprehensive strategic cost management to face effectively
companies. This mechanism, to a very large extent, has helped the emergence of competitiveness. In the post-liberalization era,
them to face the fierce competitive forces arising out of post-1991 there is need to enhance and retool the mechanism of cost audit
liberalization and globalization. It served well the legal and non- to enable performance management as a part of the governance
legal requirements of various regulatory authorities, government framework (Banerjee, 2015). Such an alignment is possible

COST AUDIT
only by way of statutory support. Even with liberalisation and of cost data, and reducing cost of compliance;
globalization, certain level of regulation of the economy is (c) recognize cost accounting standards issued by the
essential for sustainable economic development10. Institute to bring uniformity and standardization in cost
The Group further noted that in the WTO regime, the country statements, and
needs to build up appropriate cost data-base to detect or fight (d) fulfil requirements of various Government authorities and
all anti-dumping cases. Similarly, cases relating to transfer regulatory bodies for availability of certified cost data of
pricing, or arm’s length price, cannot be decided judiciously in all companies for their purpose and improve the quality
the absence of reliable cost data. Such a reliable, standardized of cost information for better decision making so as to,
and industry-wide data-base is possible only by way of statutory in-turn, help the industry and the economy11.
cost accounting and reporting framework. This would ensure
maintenance of structured cost records system in each company The new structure/framework was widely applauded by all
and cost audit would provide requisite assurance on the stakeholders, especially by the industry. Since June 2011, more
authenticity of cost data to all stakeholders. This mechanism than 200 programmes were held throughout the country in
would lead to better governance, improved competitiveness and association with the industry and other stakeholders wherein
smooth functioning of regulatory agencies. The Expert Group these reforms taken by the MCA were highly appreciated. In fact,
made 39 recommendations, grouped in 6 categories. a few companies even wrote to MCA on this, appreciating the
The Group submitted its Report to MCA in December, 2008 change and thanking the Government.
which was fully endorsed and signed by all the 15 members
representing different stakeholders. The only dissent was from Legislation for Cost Accounting Record Rules and
the representative of the Institute of Chartered Accountants of empowering Cost Audit
India. However, the Expert Group noted that majority of the views We have mentioned earlier that, in 1965, the provisions for
expressed by the dissenting member are in complete consonance maintenance of Cost Accounting Record Rules [Section 209(1)
with the Observations and Recommendations made by the Expert (d)] and those for Cost Audit (Section 233-B) were incorporated
Group in its report. MCA put this report on its website in March in the Companies Act 1956. The ICAI played its role by formulating
2009 and received a number of views/suggestions. Those were CRRs in 44 industries. The Government introduced the reformed
examined. To suggest modalities for implementation of the mechanism in the Rules notified and orders issued in 2011.
recommendations made by the Expert Group, MCA constituted The Ministry of Corporate Affairs (MCA) amended the
a Task Force in November 2009 and its report was received in revised procedure of appointment of Cost Auditor. Now the
February, 2010. Audit Committee of a company is the first point of reference
Based on the recommendations/suggestions made by the for appointment of cost auditor to be made by the Board of
Expert Group/Task Force, suggestions made by regulators and Directors (vide General Circular number 15/2011 dated April 11,
user-departments and other stakeholders and the subsequent 2011). MCA also issued industry specific Cost Accounting Records
examination/discussions held in MCA, revised rules/orders were Rules in the same year for six regulated industries, namely,
issued from June 2011 till November 2012. These revised rules/ Telecommunication, Petroleum, Electricity, Sugar, Fertilizer and
orders were made effective in stages, from the financial year Pharmaceutical (vide G.S.R. 869(E) to 874(E) dated 7th December
beginning 1.4.2011, 1.4.2012 and 1.1.2013, respectively. By virtue 2011). These cost accounting records rules permit maintenance
of these changes, major reforms were instituted in the existing of principles-based Cost Accounting Records by the companies
structure/framework of cost accounting records and cost audit covered under these rules.
that existed since 1965. It is common knowledge that the Bill for New Companies Act
was under the active consideration of the Government since long.
The reforms taken by the Government were intended to: So, the Government set up an “Expert Committee on the New
Company Law”. The observations of the Expert Committee on this
(a) give a regulatory push to the Indian companies to issue are noteworthy12:
attain highest level of cost management and cost Cost Records and Cost Audit were important instruments that
competitiveness, and strengthen the corporate governance would enable companies make their operations efficient and
mechanism; exist in a competitive environment, and enabling provision may
(b) fulfill various demands of industry with regard to be retained in the law providing powers to the Government to
simplification of rules, procedures, structure, and formats cause Cost Audit.
with due emphasis on cost and efficiency parameters, Earlier, the Standing Committee on Finance in its report
removal of discrimination, addressing the confidentiality on the Companies Bill 2009 also emphasized on mandatory

maintenance of cost records, coverage of more number of We now make a comparison between the legal provisions
companies, particularly in sectors concerning exploration, mining, relating to maintenance of Cost Accounting Records and Audit
processing, manufacturing, infrastructure and utilities under cost thereof in the Companies Act, 1956 and those incorporated in the
audit and due compliance with the cost accounting standards and Companies Act, 2013. It may be mentioned that the requirement
cost auditing standards13. Thus, maintenance of Cost Accounting of maintenance of Cost Accounting Records was in Section 209(1)
records and audit of such records was considered imperative by (d) in the Companies Act 1956 which finds place in Section 128
several Committees during these periods. of the Act of 2013. Similarly, the corresponding provisions of
The importance of service sectors, such as Banking, cost audit under section 233-B of the Act of 1956 finds place
Insurance, Health Services, Education, Hotel, etc., has increased in Section 148 of the Act of 2013. The comparison of these two
tremendously after the liberalization of the economy in view of important aspects, maintenance of Cost Accounting Records and
their contribution to GDP. Accordingly, it was recommended that Cost Audit, may reveal the type of changes, if any, that have been
necessary changes in the new Companies Act be made to bring made in keeping with changing requirements of the industries
the services sectors under the umbrella of maintenance of cost in particular and economy in general, as suggested by various
accounting records and cost audit thereof. Expert Committees over time, mentioned earlier.
a) Maintenance of Cost Accounting Record Rules

Section 209(1)(d) Section 128
The prerequisite of a Cost Audit is the existence of accounts and this With enactment of the Companies Act, 2013, books of accounts to
has been ensured by the rules prescribed under Section 209(1) (d) of the be maintained by a company are prescribed in Section 128.
Companies Act, 1956. Section 128 of the Act mandates the books of accounts to be
Section 209(1) (d) runs as follows: kept by a company. Under Explanation for maintenance of
“S.209. (1) Every company shall keep at its registered office proper books
of account with respect to books of accounts serial 5 states that “A company engaged
(d) In the case of a company, pertaining to any class of companies in production, processing, manufacturing or mining activity,
engaged in production, processing, manufacturing or mining activities, is also required to maintain particulars relating to utilization
such particulars relating to utilization of material or labour or to other of material, labour or other items of cost as the Central
items of cost as may be prescribed, if such class of companies is required
by the Central Government to include such particulars in the books of Government may prescribe for such class of companies.”
account: Section 2(13) defines books of accounts. Clause (iv) to this sub-
Provided that all or any of the books of account aforesaid may be kept at section states about the “items of cost as may be prescribed
such other place in India as the Board of Directors may decide and when under Section 148 in the case of a company which belongs to
the Board of Directors so decides, the company shall, within seven days
any class of companies specified under that Section.”
of the decision, file with the Registrar a notice in writing giving the full
address of that other place.” Note: Companies (Cost Records and Audit) Rules, 2014 (as amended,
Note: For details of books account vide Guidance Note (http://ghsa.in/ up to, 15’th July, 2016) give details of books of account. (http://
wp-contnt/uploads/2013/01/Guidaence_Note_on_Maintenance_of_ icmai.in/upload/Students/Circulars/Companies-Rules-2014.pdf)
Cost_Accounting_Records_18_5_2012.pdf)
b) Cost Audit
Section 233-B Section 148
The power of ordering Cost Audit is contained in Section 233-B of the With enactment of the Companies Act, 2013, Cost Audit has also
Companies Act, 1956. been retained as per Section 148.
Section 233-B is reproduced as follows: 148. (1) The Central Government may, by order, in respect of
“233-B. (1) Where in the opinion of the Central Government it is necessary such class of companies engaged in the production of such
so to do in relation to any company required under clause (d) of sub- goods or providing such services as may be prescribed, direct
section (1) of Section 209 to include in its books of accounts the particulars that particulars relating to the utilisation of material or labour
referred to therein, the Central Government may, by order, direct that an or to other items of cost as may be prescribed shall also be
audit of cost accounts of the company shall be conducted in such manner included in the books of account kept by that class of companies:
as may be specified in the order by an auditor who shall be either a cost Provided that the Central Government shall, before issuing such
accountant within the meaning of the Cost and Works Accountants Act, order in respect of any class of companies regulated under a
1959 or any such chartered accountant within the meaning of the Chartered special Act, consult the regulatory body constituted or established
Accountants Act, 1949 or other person as possesses the prescribed under such special Act.
qualifications. (2) If the Central Government is of the opinion, that it is necessary
(2) An auditor under this section shall be appointed by the Board of to do so, it may, by order, direct that the audit of cost records of
Directors of the company in accordance with the provisions of sub- class of companies, which are covered under sub-section (1) and
section (1B) of Section 224 and with the previous approval of the Central which have a net worth of such amount as may be prescribed or a
Government. turnover of such amount as may be prescribed, shall be conducted
in the manner specified in the order.

COST AUDIT
Provided that before the appointment of any auditor is made by the (3) The audit under sub-section (2) shall be conducted by a Cost
Board, a written certificate shall be obtained by the Board from the Accountant in practice who shall be appointed by the Board on such
auditor proposed to be so appointed to the effect that the appointment, remuneration as may be determined by the members in such manner
if made, will be in accordance with the provision of sub-section (1B) of as may be prescribed:
Section 224.
(3) An audit conducted by an auditor under this section shall be in Provided that no person appointed under Section 139 as an auditor
addition to an audit conducted by an auditor appointed under Section of the company shall be appointed for conducting the audit of cost
224. records:
(4) An auditor shall have the same powers and duties in relation to an Provided further that the auditor conducting the cost audit shall
audit conducted by him under this section as an auditor of a company comply with the cost auditing standards.
has under sub-section (1) of section 227 and such auditor shall make his
report to the Company Law Board in such form and within such time as Explanation.—For the purposes of this sub-section, the expression “cost
may be prescribed and shall also at the same time forward a copy of the auditing standards” mean such standards as are issued by the Institute
report to the company.” of Cost Accountants of India, constituted under the Cost and Works
By the Companies (Amendment) Act, 1974, only a cost accountant Accountants Act, 1959, with the approval of the Central Government.
within the meaning of Cost and Works Accountants Act, 1959 has been
empowered to conduct a cost audit.
The Central Government has the power to notify that chartered
accountants having prescribed qualifications may act as cost auditors.
But no such notification has been issued by the Central Government
as yet.
There are some changes in the above legislations brought in the Another notable addition is Amendment of Rules 201614. In
Companies Act, 2013 relating to maintenance of cost accounting exercise of the powers conferred by sub-sections (1) and (2) of
records and cost audit. Some of them are mentioned below: section 469 and section 148 of the Companies Act, 2013, the
Central Government makes the following rules further to amend
(a) In the scope, the words, “production, processing, the Companies (cost records and audit) Rules, 2014, namely:-
manufacturing or mining activities”have been replaced with 1. (1) These rules may be called the Companies (cost records and
“production of such goods or providing such services”. audit) Amendment Rules, 2016. (2) They shall come into
(b) Proviso to sub-section (1) has been added which says that force on the date of their publication in the official Gazette.
the Central Government shall, before issuing such order 2. In the Companies (cost records and audit) Rules, 2014
[i.e. order for maintenance of cost accounting records] in (hereinafter referred to as the Principal Rules),
respect of any class of companies regulated under a special (i) in rule 2, for clause (d), the following clause shall be
Act, consult the regulatory body constituted or established substituted, namely:-
under such special Act. This implies consulting the ICAI for “(d) “cost audit report” means the duly signed cost auditor’s
the purpose. report on the cost records examined and cost
(c) As per the new provision, cost auditors shall be appointed by statements which are prepared as per these rules,
the Board [without prior approval of the Central Government] including attachment, annexure, qualifications or
on such remuneration as may be determined by the members observations attached with or included in such report;”
“in such manner as may be prescribed”. (ii) in rule 3, for Table (A) and Table (B), two Tables15 shall
(d) As per section 148 of the Companies Act, 2013, the cost be substituted, namely, (A) Regulated Sectors, and (B) Non-
auditor shall submit his/her report to the Board of Directors Regulated Sectors
of the company and the company shall within thirty days
furnish the same to the Central Government. Summary and Conclusion
(e) As per sub-section (3) of section 148 of the Companies Act, It has been mentioned earlier that maintenance of cost
2013, the auditor conducting the cost audit is required to accounting record rules and cost audit were introduced in
comply with the cost auditing standards issued by the 1965 to ensure mainly optimum utilisation of resources. When
Institute of Cost Accountants of India with the approval of manufacturing activity uses imported raw matrials, efficient use
the Central Government. This is a welcome addition to ensure of materials has a favourable impact on foreign exchange outgo.
effectiveness of cost accounting standards issued by the ICAI. Maintenance of specified books of cost accounts presupposes
(f) Penalty provisions have also been modified in line with the maintenance of a cost accounting system. The idea was to make
general framework of the Companies Act, 2013. sure that every manufacturing company employ a cost accountant
(g) Sub-sections (9) and (10) of section 233B of the Companies so that reliable cost data are available for informed decisions. The
Act, 1956 have been deleted. cost accounting framework was expected to inculcate a culture of
cost consciousness amongst the industries and improve resource

management. This was also expected to promote efficiency audit. exceed its cost of operation of the system. Why then modern
The need for cost accounting in the post-liberalisation period cost and management accounting should not be a part of
has also been mentioned earlier in section 3. It is well-established modern management system in any organisation? In that case,
through empirical and fundamental researches that cost is one maintenance of specified cost books will be a routine matter
of the ‘success factors’ and has to be managed strategically without any problem. This in turn will promote cost audit.
(Banerjee, 2014). Cost and management accounting is now an They are complimentary to each other. Let the ICAI continue
integral part of modern management process. It serves as an to play its pioneering role more effectively in the proposed
important tool to the management to face growing pressure changed context.
of global competition, technological innovations, volatility
in exchange rates and input prices and change in business References
processes. Thus, cost and management accounting has been 1. Banerjee, Bhabatosh (2014). “Strategic Cost Management:
changing form from a traditional role to a broader “strategic Conceptual Underpinning”, The Management Accountant,
February, pp.56-62.
focus” (Porter, 1985; Cooper, 1995).
2. Banerjee, Bhabatosh and Das, Ujjwal (2017). “Cost Accounting
Cost accounting standards on different cost areas have Standard Setting in India”, The Management Accountant,
now become a fact of corporate life in India and many other February, pp. 86-94.
industrialised countries (see Banerjee, et. al 2017). These 3. Banerjee, Kunal (2015). Guide To Cost Accounting Records & Cost
Audit-Under Companies (Cost Records and Audit) Rules 2014,
standards are intended to bring uniformity and consistency in
2nd Ed., pp.3.
the principles and methods of determination of cost of a product 4. Cooper, Robin (1995). When Lean Enterprises Collide: Competing
or service. Cost statements cannot be described as complying Through Confrontation. Harvard Business School Press.
with the Cost Accounting Standards unless they are in conformity 5. Porter, Michel E. (1985). Competitive Advantage: Creating and
with the requirements of each applicable standard. So cost Sustaining Superior Performance. New York: The Free Press.
accounting standards have now become integral part of cost and Foot Notes
management accounting system in any modern organisation. 1
This is part of a project undertaken for documenting the Institute’s
Accordingly, need for modern cost and management accounting role in developing the cost and management accounting profession
has increased several folds in the present day competitive in India. Comments from the members and others are solicited
environment. (email: [email protected] or [email protected]).
Corporate financial reports have now become indispensible 2
Banerjee. B. (2016). Cost Accounting –Theory & Practice, 13’th Ed.,
legally and otherwise. Continuous changes in financial reporting p.887.
have also been taking place (e.g. Financial Reporting and 3
http://www.takeovers.gov.au
CSR, Value Creation and Distribution and Integrated Financial 4
http://reports.mca.gov.in/Reports/
Reporting, etc.). One of the objectives of financial audit or 6
h tt p : / / i c m a i . i n / u p l o a d / I n s t i t u t e / E x p e r t C o m m i tt e e /
statutory audit is to enhance credibility and reliability of GenesisforRegulatoryMechanism.pdf
financial information published in financial statements prepared 7
http://www.mca.gov.in/Ministry/actsbills/pdf/Cost_and_works_
by corporate enterprises. Many reforms have been taking place, Accountants_Act_1959.pdf
nationally and internationally, to improve the usefulness of 8
http://icmai.in
financial information for enhancing value of the firm. Because 9
of convergence of national standards with IFRS, comparable 10
http://icmai.in/
financial information are now available internationally to take 11
informed decisions by the creditors and investors. Multinational 12
www.mca.gov.in
companies are enlisting their shares on foreign stock exchanges 13
www.mca.gov.in
for several benefits. 14
www.mca.gov.in, Notification, New Delhi, the 14th July, 2016.
The same argument can be given in favour of modern Cost and 15
Regulated Sectors (A) include Telecommunication services;
Management Accounting and cost data that are available from generation, transmission, distribution and supply of electricity;
the system. Cost Audit will then be a natural process for accurate petroleum products; drugs and pharmaceuticals; fertilizers, and
and reliable cost data. So, we strongly argue in favour of a modern sugar and industrial alcohol. Non-regulated Sectors (B) include
Cost and Management Accounting in every organisation, both large number of industries/products shown under 33 serials (for
manufacturing and service, so that relevant and reliable cost data details see http://www.icmai.in/upload/Institute/Updates/Gazette-
are available for informed decisions. Notification-CCRA-Rules.pdf)
It is well-established in the available literature that Cost
Accounting pays for itself, that is, benefits arising out of it far [email protected]

BANKING
TRUNCATED
BOARDS
OF PUBLIC
SECTOR BANKS
T
he Public Sector Banks in India control about
74% of the loans and advances of the entire
banking system. The aggregate business of Public
Sector Banks is about 71% of the total business
of banking sector in India. The share of business
controlled by Public Sector Banks signifies
the importance of role played by them in the
development of trade and economy of the country. These banks have
stood test of time and showed remarkable resilience in the post-U.S
financial crisis of 2008. There are 27 Public Sector Banks in India as
shown in the following table:
Original No. Present No.

Sl.No. Category of Banks
of Banks of Banks
State Bank and its
1. 8 6
Associates
2. Nationalised Banks 20 19
3. IDBI Bank 1 1
Bharatiya Mahila
4. 1 1
Bank
Total 30 27
These banks are brought to/created as Public Sector Banks by
their respective Acts of Parliament. They are therefore governed
by such Acts. They are also additionally governed by the Banking
Regulation Act 1949, Reserve Bank of India Act, 1934. Most of the
Public Sector Banks have raised a part of their share capital from the
market and hence are listed on the Stock Exchanges of the country.
Introduction of Prudential Accounting Norms during the year 1992
was a significant decision and changed the structure of capital of all
the banking companies in India including that of Public Sector Banks.
The banks are required to maintain a capital as a specified ratio to
the Risk Weighted Asset Value of the items appearing in the Balance
Sheet and also the contingencies shown as non-fund based items off-
Dr. Jai Deo Sharma Balance Sheet. The availability of capital therefore acts as a restrain
Former Director – Indian Overseas Bank on expansion of credit.
Noida

Constitution of Banks’ Boards  Audit Committee of the Board
The Constitution of the Boards of State Bank of India and its  Risk Management Committee of the Board
Associates, IDBI Banks and Bharathiya Mahila Bank is in terms  Nomination Committee of the Board
of the Provisions of the respective Acts, while the Constitution of  High Value Frauds Committee of the Board
the Boards of Nationalised Banks is governed by The Nationalised  IT Strategy Committee of the Board
Banks (Management and Miscellaneous Provisions) Scheme,  Remuneration Committee of the Board
1970/80. The modifications and amendments to the Scheme  Customer Service Committee of the Board
for constituting the Boards of Public Sector Banks are advised  Committee of Directors (for General Manager Promotion)
by Reserve Bank of India and Government of India from time to  HR Committee of the Board
time. Consequent to the listing of Public Sector Banks on Stock  Shareholder/Investors Grievance Committee of the Board
Exchanges, the constitution of Board is also governed by Section  Share Transfer Committee of the Board
9 (3) of Banking Companies Act and SEBI / Stock Exchanges
Listing Agreements. The structure of the Boards of Public Sector The Board also constitutes Credit Approval Committee to be
Banks having been frozen in the foregoing Provisions, is quite headed by the Chairman/MD &CEO, Executive Director, General
comprehensive in itself. These Acts laid down the provisions to Manager, Zonal / Regional Manager for the purpose of taking
the last detail about the manner in which the Board positions are to credit decisions upto the specified amounts as per the discretion
be filled. The broad structure of the Boards of Public Sector Banks of the respective committee.
consists of the Directors belonging to the following categories:
1. Chairman The main objective of constituting specialised committees is
2. Chairman cum Managing Director or to ensure a focussed, enhanced and qualitative decision making.
3. Managing Director / Chief Executive Officer But the constitution of the Board itself is so arbitrary that the
4. Executive Directors Committees may not have all the members possessing specialised
5. Government Nominee Director knowledge of the related field. This situation gets further
6. Reserve Bank Nominee Director compounded as the Government appoints its nominee directors
7. Officer-Employee Representative mostly for the considerations, which are non-banking in nature,
8. Workman-Employee Representative predominantly influenced by proximity to the power centres
9. Chartered Accountants in the Government. It is an accepted fact that for enhancing
10. Specialists Directors from the field of Finance, Economics, the effectiveness and quality of Board Room deliberations, the
Banking, Artisans, Agriculture etc. or any other area Directors must bring to fore the challenges and emerging concerns.
considered useful to the bank by Reserve Bank of India. Free and frank deliberations should be encouraged so as to enable
11. Additional Director nominated by RBI under special well informed and quality decisions. Constructive criticisms and
circumstances. consensus building should form an integral part of the Board Room
12. Shareholder Representatives depending on the equity culture. But such good practices are found wanting in the Board
holding by non-governmental investors (One Director upto Rooms of Public Sector Banks.
16%, two Directors from 16% to 32% and three Directors
above 32% equity holding by non-governmental investors. Banks’ Board Bureau
A review of the performance of Public Sector Banks is done
The main functions of the Boards of Public Sector Banks include on a regular basis by the Government of India by evaluating the
the following: attainment of goals set in the Statement of Intent submitted by
1. To establish policies relevant to the business of the bank the banks to Government of India in the beginning of the year.
2. To take important, strategic and significant decisions Reserve Bank of India also conducts on-site and off-site review
3. To oversee and review attainment of objectives of the performance of the banks. Deteriorating performance of
4. To constitute committees of the Board to discharge different Public Sector Banks in last few years has been causing serious
functions of the Board so as to effectively strengthen the concern to the Government and Regulators. The major areas of
Governance process concern being the following:
1. Decline in Profits and Profitability
The Public Sector Banks are required to have the following Sub- 2. Mounting Non-Performing Assets
Committees of Board of Directors: 3. Deteriorating Capital Adequacy Ratio
4. Poor quality of Directors
 Management Committee of the Board 5. Falling standards of Corporate Governance

BANKING
6. Legacy issues on HR front d) To put in place a Governance and Accountability framework

7. Skill Gaps
8. Technology Infrastructure Banks’ Board Bureau (BBB) is a fiduciary entity and its Chairman
and Members are appointed on a part time honorary basis. The
Ideally the Board should have collective wisdom and skills to appointment of Mr. Vinod Rai as Chairman evoked sharp criticism
address the concerns listed above. The system of Board Level from different quarters as an alleged violation of Article 148 (4)
appointments did not keep pace with the emerging challenges. of the Constitution of India which provided that the Comptroller
It was in this background, the Indian Banks’ Association and and Auditor General shall not be eligible for further office under
Government of India organised Gyan Sangam - a conclave of Top the Government of India or under any of the State Governments
Bankers and experts during January 2015 at Pune. Indradhanush after he ceased to hold office. But the Government contended
1.0, a 7-point programme was announced in August 2015 with a focus that Article 148 (4) is not violated in appointing Mr. Vinod Rai as
on revamping the functioning of Public Sector Banks. Constituting Chairman of BBB as the job was part time without involving any
a Banks’ Board Bureau to be followed by setting up of Banking compensation or emoluments. It raises an important question as
Investment Company was one of the elements of Indradhanush to why the Government should create an entity for carrying out
1.0. Accordingly the Ministry of Finance, Government of India the all important functions incorporated hereinbefore without
released a Press Note on 28.02.2016 announcing constitution of providing for any emoluments. It is common understanding
Banks’ Board Bureau to come into effect from 01.04.2016. Mr. that any entity tasked with a large role in determining the fate
Vinod Rai, former Comptroller and Auditor General of India was of Public Sector Banks and Financial Institutions must also take
appointed as its Chairman with Secretary, Department of Financial responsibility and be accountable for its poor performance. With
Services, Secretary, Department of Public Enterprises and Deputy the given set up of BBB, it is nobody’s accountability, if it fails
Governor, Reserve Bank of India as ex-officio members. The Board to discharge its functions effectively. In the following pages, an
also had Mr. Anil Kumar Khandelwal, ex-CMD, Bank of Baroda, attempt has been made to evaluate the efficacy of Banks’ Board
Mr. H.N.Sinor, Joint MD, ICICI Bank and Ms. Rupa Kudwa, former Bureau in the important areas of its concern.
MD & CEO, CRISIL as other members. The main objective of Banks’
Board Bureau was to improve the Governance of Public Sector Present Position of PSBs’ Boards
Banks. To meet its objective, the Board was mandated to carry A study of the present position of the Boards of Directors of
out the following functions: Public Sector Banks would reveal a pathetic picture. The following
a) To select and recommend appointment of Heads of Banks table contains the broad view of the Board of Directors of Public
and Financial Institutions Sector Banks, in terms of filling up of vacancies without going into
b) To help banks in developing Innovative Financial Methods, the merits, competency, capability and usefulness of those who are
Strategies and Plans to raise capital. on the board for the time being(1.2.2017):
c) To suggest Mergers and Acquisitions
Total Strength of Present Strength of % of post lying

S.No. Name of the Bank
Directors Directors vacant
1. Allahabad Bank 13 9 30.77
2. Andhra Bank 13 8 38.46
3. Bank of Baroda 15 13 13.34
4. Bank of India 15 9 40.00
5. Bank of Maharashtra 13 8 38.46
6. Canara Bank 16 13 18.75
7. Central Bank of India 13 8 38.46
8. Corporation Bank 13 9 30.77
9. Dena Bank 14 11 21.43
10. Indian Bank 14 10 28.57
11. Indian Overseas Bank 15 7 53.33
12. Oriental Bank of Commerce 15 10 33.33
13. Punjab National Bank 15 7 53.33
14. Punjab & Sind Bank 13 7 46.15
15. Syndicate Bank 14 10 28.57
16. UCO Bank 14 6 57.14
17. United Bank of India 12 5 58.33

18. Union Bank of India 15 10 33.33
19. Vijaya Bank 14 11 21.43
20. State Bank of India 17 14 17.65
21. State Bank of Bikaner and Jaipur 15 9 40.00
22. State Bank of Hyderabad 15 10 33.33
23. State Bank of Mysore 15 12 20.00
24. State Bank of Patiala 15 9 40.00
25. State Bank of Travancore 15 9 40.00
Total 345 225 34.78
A perusal of the above table would reveal that as against the proposition is expected to help him execute his plans in an effective
total vacancies of 345, only 225 vacancies have been filled up manner which is possible only if he has a fairly long tenure. This
leaving 120 vacancies unfilled. The unfilled vacancies, therefore, observation by Mr. Rai lends credence to the proven reality of
come to 34.78% of total vacancies. A deficiency of such high order Public Sector Banks having a top driven culture which does not do
as 34.78% in Public Sector Banks, is quite a serious issue and has good to an organisation in long term. There is a need to develop
a direct impact on the quality of Board Room deliberations. It can and promote an internal organizational culture which can create
be further seen that the banks like Indian Overseas Bank, Punjab a sustainable business model. The posting of full time Directors
National Bank, United Bank of India and UCO Bank which are more from other banks has resulted in the cross-cultural conflicts and
deficient in their Board Strength, are poor performers in terms of resource drain in managing them. Each of the Public Sector Banks
NPA management and profitability. On the other hand, the banks had its own rich culture and heritage which has been destroyed
like Bank of Baroda, Canara Bank, Dena Bank and Indian Bank are by posting CEOs from other banks who invade the culture by
better performers on similar parameters. importing the culture from their earlier bank. It is proposed to
the Government to consider promoting internal CEOs and save
It is reported that Banks’ Board Bureau has selected and precious resources which are wasted now in cross-cultural conflict
recommended for appointment to Appointments Committee management. State Bank of India is a live example where cross-
of Cabinet the names of 9 General Managers to be posted as cultural conflicts are not faced. If this concept is working well in
Executive Directors to different banks. On its recommendations State Bank, it would also work well in other Public Sector Banks.
being accepted, there will be part filling of Board Level 9 vacancies The internal CEO would require no extra take off time to evolve and
as against the existing vacancies of 120. There is much more to be execute his plans as he would be the part of the system which has
done by the Banks’ Board Bureau in this regard. More than number been evolving continuously. Another implication of longer tenure
game, it is the merit and quality of candidates which is important to for CEO is that if a wrong choice is made, we get stuck up with it
ensure better governance. It is also important to observe that the for a longer period of time affording him enough opportunity to
standards of the quality and competence of the Directors on the cause destruction. I have always wondered if a non-performing
Board of Public Sector Banks have deteriorated during the last few Branch Manager or a Regional Manager could be removed and
years. The root cause of such decline is having its genesis in the re-deployed to a lesser significant assignment, why the similar
quality of recruitment in Officers Cadre of Public Sector Banks over approach could not be adopted in dealing with a non-performing
a period of time as far as the Full Time Directors are concerned. CEO by re-deploying him and saving the Public Institutions.
In case of non-official Directors it is believed that meritocracy has
given way to the proximity to the establishment. Unless these Level of NPAs
two issues are addressed, the Banks’ Board Bureau will be able Bad and Doubtful Debts of the banks are known as Non-
to produce same old wine in new bottle without bringing about Performing Assets. The banks are not allowed to book any interest
qualitative difference in the functioning of Board Rooms of Public on NPAs to their Profit and Loss Account. On the contrary the
Sector Banks. Consequently the truncated Boards of Public banks are required to make provisions on NPAs out of the profits
Sector Banks will continue to have the same standards despite the earned at the followings rates:
existence of Banks’ Board Bureau. It will be preparatory to make a) NPAs upto 180 days - 15%
out a case for privatisation of Public Sector Banks. This gives rise b) NPAs more than 180 days to 2 years - 40%
to suspicion that BBB is likely to work on such a broader agenda. c) NPAs more than 2 years - 100%
d) Loss Assets (unrecoverable)/Frauds - 100%
Tenure of MD & CEO RBI has advised the banks to have adequate provisioning against
Mr. Vinod Rai has been of the view that the tenure of MD & NPAs so as to have a Provision Coverage Ratio 70%. As against
CEO at Public Sector Banks should be atleast for six years. This the expected Provision Coverage Ratio of 70%, the banks like

BANKING
Allahabad Bank(46.03%), Indian Overseas Bank(46.61%), Vijaya perspective. Deterrent alone can be the right remedy to minimise
Bank(48.55%) and Oriental Bank of Commerce(49.33%) have very the level of NPAs.
low Provision Coverage Ratio(PCR). The PCR of most of the banks
falls between 45 & 55% barring some Private Sector Banks like Recapitalisation of Banks
Development Credit Bank (75.25%), Dhanalakshmi Bank (75.54%), One of the functions of Banks Board Bureau is to develop
Federal Bank(72.09%) and Axis Bank(69.0%), having higher innovative financial methods, strategies and plans to raise capital.
Provision Coverage Ratio. The Non-Performing Assets of banks in Despite a lapse of one year and some of the Public Sector Banks
India amount to 9.2% of the total loans and advances. However, having serious challenge of raising capital on their own, the Banks
in case of Public Sector Banks Non-Performing Assets are as high Board Bureau has not been able to evolve any methodology or
as 12% of total loans and advances. The slippages to NPA category strategy to help the Banks plan augmenting their capital. The
in the last two years have been quite high. The Gross NPAs are Government of India on its part had provided for re-capitalisation
reported to be around Rs.7.00 lakh crores and after Asset Quality of Public Sector Banks by ear-marking Rs.70000 Crores to ensure
Review by RBI which is expected to be completed by 31st March compliance with BASEL III norms spanning over 4 years. The
2017, the NPAs are expected to gross Rs.8.00 lakh crores. About allocation was Rs.25000 Crores for the year 2015-16, Rs.25000
55% of NPAs are contributed by Large Corporate Borrowers. The Crores for the year 2016-17, Rs.10000 Crores for the year 2017-18
sectors like Highways, Infrastructure, Steel, Aluminium, Real Estate and Rs.10000 Crores for the year 2018-19. Even as per the old
etc. are the major contributors to the NPAs, particularly of Public estimates, the gap will remain Rs.110000 Crores which is expected
Sector Banks. The NPAs in smaller value category are encouraged to be made good by the banks on their own either through
by political pronouncements of loan waiver as election promise internal accruals or from the market by issuing equity shares or
by different political parties. There is need for the politicians to debt instrument. It is quite interesting to note that the internal
exercise restraint in the long term interest of the banking system accruals of the Public Sector Banks have been severely hit by the
in the country. decline in profitability and hence only a few banks are in a position
to plough back to improve their capital base. Other banks have to
There are serious discourses on the issue of cleansing the fend for themselves. Such a situation would involve the questions
Balance Sheets of Public Sector Banks even if it warrants creation of their capacity to raise capital and also at what cost? A bank
of a Bad Bank in the form of new Asset Reconstruction Company with poor financials will find it difficult to raise capital in a cost-
with the predominant shareholding of the Government of India. effective manner. The high cost of capital will be a further drag
This is gaining ground with Mr. Viral Acharya taking over as Deputy on their profits, thereby driving such banks into a vicious circle.
Governor of Reserve bank of India. It was about two years ago Under these circumstances, Banks Board Bureau faces an uphill
that Mr. Acharya had suggested setting up of a Bad Bank in one task to ensure adequacy of the capital for the Public Sector Banks
of his Research Papers. But such a thought is shortsighted in as to help them meet BASEL III deadlines. The need at this juncture
much as the phenomenon of NPAs is not one-time affair in Indian is to make the Public Sector Banks a self-sustaining model and the
banking space. NPAs are part of business of banking and need Government and RBI should come to terms that banks are allowed
to be managed in an efficient manner. The subject of NPAs is so to fix price of their products in a profitable manner like Oil and
complex that it is also influenced by non-business factors viz., Petroleum Marketing Companies. The Government’s persistent
delayed Government clearances, environmental hurdles, global attempt to get the interest rate on loans reduced is at conflict with
economic scenario, time and cost over-runs, change in Government the re-capitalisation of Public Sector Banks. Government need
Policies, political philosophy of loan waiver from time to time and to resolve such a serious conflict on a priority basis. Since the
thereby vitiating the loan repayment culture etc. There is an urgent Public Sector Banks are also commercial entities, their interests
need to address these issues too. should not be made subservient to the interest of other commercial
organisations more particularly the Private Corporate Houses that
It is surprising that the discourse is revolving around lack of default on loan repayment.
taking decision on write off for the fear of investigations and
accountability on the part of top executives of Public Sector Mergers and Acquisitions
Banks. There is need to have a stringent law to strengthen the A distinct class in the country has been suffering from merger
loan recovery infrastructure in the country so that the fear of mania for over two decades.They had strong belief that the big
punishment in the minds of the borrowers dissuades them from banks would have capacity to absorb adverse shocks in business
defaulting on bank loan repayment. Unless the loan default is and hence be preferred. This wrong notion was demolished in the
made a criminal offence, the borrowers will continue to resort to wake of U S Sub-prime financial crisis of 2008 which witnessed
willful default. It will be a wrong step to set up a Bad Bank in this the big financial houses crashing like a pack of cards. The myth

of “too big to fail” which took a temporary beating, is back again merit are compromised. In last 25 years, the Public Sector Banks
in the political and bureaucratic discourse. The personal ideas had also experienced the presence of such Directors on the Board
are institutionalized through the platforms like Gyan Sangam by who could complete their tenure without making any contribution
setting the tone of the discussion on the agenda. The counter- worth the salt to the bank. The lack of orientation towards
view points are suppressed fearing a backlash. The self-regulating business of banking, diverse skills, experience and knowledge of
organisations like Indian Bank Associations are used for spreading the issues which are deliberated in the Board were not uncommon.
the message. The on-going merger of the Associates of State Bank One needs conviction and courage to put forth his view point in
of India with the parent cannot be a trend-setter for the merger an honest manner even if it is at divergence. But one would need
of other banks in Public Sector due to various factors including to be competent and confident having unquestionable honesty in
scalability, integration, work-culture, logo, regional sentiments, his approach.
political considerations, resistance from trade unions etc. The
wounds of merger of New Bank of India with Punjab National Bank Another important aspect of the functioning of the Boards of
were experienced as a bad memory for several years. The Public Public Sector Banks is that there is no system of either peer review
Sector Banks need to inculcate a culture of objective evaluation of or superior review of the performance of the Directors. There had
the issues and challenges instead of behaving like path-beaters. been instances of people aspiring to get nominated to the Boards
It would make better sense to traverse the uncharted path rather of Public Sector Bank for extraneous considerations like status
than taking the path which are demonstratively injurious. The symbol, business interest, enhancing the area of influence and
focus of the policy makers including Government, RBI, IBA, BBB etc. at times misusing their position as Directors. There is an urgent
should be on restoring the Public Sector Banks to health instead of need to revamp the system of selection of non-official directors
playing with their fabric. too. The people merely fulfilling the eligibility criteria cannot be
nominated to the Board of Public Sector Banks unless they have
Corporate Governance exhibited and demonstrated proven quality and competence in a
Corporate Governance essentially means a process to enhance field which is relevant to the business of banking. An orientation
the value of all the stake holders in a transparent and ethical training programme at the institutions of professional competence
manner. In the case of Public Sector Banks the stake holders shall in the field must be a must. It would be naïve to expect a newly
broadly fall under the following categories: nominated member on the Board to be fully competent and familiar
 Depositors of the bank with the agenda to be transacted in the Board.
 Borrowers of the bank
 Shareholders of the bank
Reserve Bank of India had stipulated ‘fit and proper’ criteria for
 Employees of the bank
nomination of the Directors on the Board of Public Sector Banks.
 Vendors of the bank
 Service Providers to the bank But it is often seen that the personal interests do influence his
 Regulators objective exercise of duties towards his role as a Director on
the Board of Public Sector Bank. Another important challenge
The banks operate in a very competitive business environment. arises out of distinct and more important treatment given to the
It is therefore important to make the Corporate Governance an Government and RBI nominees by treating them superior to other
integral part of business culture. There is a myth that the Corporate Directors irrespective of merits possessed. It leads to an unfair
Governance begins and ends at the level of Board of Directors. treatment meted out to other Directors by curtailing their time
The role of Board of Directors as stated earlier revolves around to deliberate on the issues of importance. It is also time for a
framing the policies, taking a strategic and significant decision Government and RBI to revamp and recast the Constitution of
and overseeing the process of attaining the said objectives. All the Board by weeding out those categories of Directors whose
these functions are sought to be discharged in an objective and roles have significantly become narrower. The Directors with more
transparent manner. When it comes to the overall Corporate appropriate skills, knowledge, merit and orientation shall enhance
Governance, the Board of the Bank must lead by example by setting the level of Corporate Governance in Public Sector Banks.The
higher standards of Governance. But it is easier said than done truncated Board of Public Sector Banks as they stand today, cannot
for different reasons. be expected to do anything better unless the serious concerns
raised in this Article are addressed with alacrity.There is need to
The political system of the country being what it is, it has evolve higher standards of Corporate Governance to integrate
been the experience that the Directors on the Board are ethics and transparency to the functioning of Public Sector Banks.
appointed largely based on representation and their proximity to
establishment. In the process, the knowledge, competence and [email protected]

INTERNAL CONTROL
Regulatory Requirements and

Relevance in Audit of
C ost Reco r ds
T
here have been numerous occurrences of
Internal Control failures that have shaken the
global corporate world. We recollect Enron,
WorldCom, Ranbaxy, Satyam, Reebok and
Volkswagen to name a few. So, what did go
wrong in these companies?
CMA Partha S Guin Enron Scandal (2001) – Huge debts were

Practicing Cost Accountant kept off the Balance Sheet. Arthur Andersen was found guilty of
Former Head of Corporate Cost Accounts fudging Enron’s accounts. Shareholders, employees and investors
Risk Management & Internal Controls suffered losses of billions of US dollars.
Larsen & Toubro Ltd, Mumbai
WorldCom (2002)- inflated assets as much as USD 11 billion.
Lehman Brothers (2008) - Over USD 50 billion in loans

disguised as sales.
Satyam (2009) – Falsification of revenues, margins and cash

CMA Balaji Rangaswamy balances to the tune of 50 billion rupees.
DGM
Corporate Cost Accounts Reebok (2012) - Maintained four secret warehouses from where
Larsen & Toubro Ltd, Mumbai company’s goods were diverted, raised fake invoices of about Rs.
98 corer to show higher sales and claimed promotions, bonus and
incentives for higher management.
Ranbaxy (2013) – The leading generic drug maker faked test

results for FDA approval required for manufacture of the drugs in
CMA Melissa Lacerda (Nogueira) India. Had to incur penalty of over 500 million USD.
AGM
Corporate Cost Accounts Volkswagen’s (VW)(2015) - Installed “defeat software” to
Larsen & Toubro Ltd, Mumbai cheat on emission tests – a clear example of corporate unethical

behavior which further led to spending by VW on recalls to the Internal Controls, therefore, are all pervasive and are an
extent of 18.32 billion USD to rectify the emission issues. essential part of good corporategovernance that lead to value
creation. They drive all aspects of business whether financial
The list goes on. The question is how to deter such instances, or operational and are integral to business processes. Controls
what are the tools that can be built in the organisational can either beDetective controls - designed to detect errors in
processes to make the systems robust and dependable for all business processes or Preventive controls - used to keep errors
stakeholders involved, both internal and external. from happening in the first place.
The Three Lines of Defense model
Every organisation has certain objectives that it strives
to achieve. The organisations also encounter events and “The Three Lines of Defense”model addresses how specific
circumstances that threatens the achievement of these objectives. duties related to risk and control can be assigned and coordinated
These are risks an organisation must identify, analyze, evaluate within an organisation, regardless of its size or complexity.
and address. Some risks may be accepted in whole or in part as Directors and management need to appreciate the critical
business risk and some may be fully or partially mitigated to a differences in roles and responsibilities of these duties relating
point where they are at a level acceptable to the organisation. to internal controls and how they can be optimally assigned for
the organisation to have an increased likelihood of achieving its
There are a number of ways to mitigate risks, - one key method objectives. In particular, the model clarifies the difference and
being the design and implementation of effective internal relationship between the organisation’s assurance and other
controls. monitoring activities.
What are Internal Controls The responsibilities of each of the groups (or “lines”) are:
Simply put, internal controls are the checks and balances in 1. Control owners – The front line operating managers are to
the systems and processes to mitigate risks, that companies put own and manage the risks. They as ‘process owners’ have the
in place to, primary responsibility to establish adequate controls to mitigate
the risks in pursuit to achieve the objectives of the organisation.
 Ensure accurate and reliable financial reporting,
2. Oversight functions – The controlling functions to support
 Confirm compliance with laws, regulations, and policies, the management for monitoring and mitigating the risks and also
to ensure regulatory compliance.
 Safeguard assets of the organisation,
3. Independent assurance –To provide independent assurance
 Prevent and reduce losses associated with fraud, to the Board and senior management concerning the effectiveness
of management of risk and controls - normally the responsibility
in order to achieve the objectives of the organisation. of the Internal Audit function in an organisation.

INTERNAL CONTROL
Internal Control frameworks – the world over effected by an entity’s board of directors, management, and other
It was in 2002, in the aftermath of the collapse of Enron personnel, that is designed to provide “reasonable assurance”
Corporation and Arthur Andersen,that the U.S. Congress regarding the achievement of objectives in the following
passed the Sarbanes-Oxley Act, which tightened internal control categories,
over financial reporting structure. Internal controls are main
components of both the Foreign Corrupt Practices Act (FCPA)  effectiveness and efficiency of operations;
of 1977 and the Sarbanes–Oxley Act (SOX) of 2002. These acts
require public companies in the United States to maintain proper  reliability of financial reporting;
internal controls.
 compliance with applicable laws and regulations.
A control framework is a data structure that organises and
categorises an organisation’s internal control practices and COSO describes internal control as consisting of the following
procedures to create business value and minimize risk. five essential components,
The “Internal control—Integrated framework” published by  Control environment;

the Committee of Sponsoring Organisations of the Treadway
Commission (COSO) is a widely used framework in the United  Risk assessment;
States and around the world. It was initially published in 1992
“to address key challenges presented by an increasingly complex  Control activities;
business environment and help organisations worldwide to better
assess, design and manage internal control.” It was later revised  Information and communication;
in 2013.
 Monitoring.
The COSO framework defines internal control as “a process,
The above five components are further subdivided into 17 principles.
For more information readers may visit https://www.coso.org/Pages/default.aspx
The CoCo (criteria of control) framework was first published organisation’s objectives and focus on,
by the Canadian Institute of Chartered Accountants in 1995.
This model builds on COSO and is thought by some to be more  effectiveness and efficiency of operations;
concrete and userfriendly. CoCo describes internal control as
actions that foster the best result for an organisation.  reliability of internal and external reporting;
These actions contribute to the achievement of an  compliance with applicable laws and regulations and

internal policies. requirements of internal controls over financial reporting under
SOX (USA).
The UK Corporate Governance Code (formerly the Combined
Code) was developed by the UK authorities in the early Control Objectives for Information and Related Technology
1990s. Later, the Turnbull committee was established after the (COBIT) is a framework created by Information Systems Audit
publication of the 1998 Combined Code in the UK. The overriding and Control Association (ISACA),USA for information technology
requirement of their report was that the Directors should, (IT) management and IT governance.ISACA first released COBIT in
1996, originally as a set of control objectives to help the financial
(a) implement a sound system of internal controls, and audit community better maneuver in IT-related environments. It
is a supporting toolset that allows managers to bridge the gap
(b) that this system should be checked on a regular basis. between control requirements, technical issues and business
risks.
The UK Corporate Governance Code (2010) contains the
The Indian scenario
statement that:
Directors’ Responsibility statement [Section 134(5)(e) of the
‘The Directors should, at least annually, conduct a review of Companies Act, 2013] requires the Board of listed companies
the effectiveness of the group’s system of internal control and to state that ,
should report to shareholders that they have done so. The review
should cover all controls, including financial, operational and “internal financial controls” have been laid down in the
compliance controls and risk management.’ company
In June 2006, the Financial Instruments and Exchange  such controls are adequate and,
Act (J-SOX) was passed by the Diet, the National Legislature
of Japan. The requirements of this legislation are similar to the  such controls are operating effectively.
IFC means policies & procedures adopted by the company for ensuring [See 134(5)(e)]:
Operational
Controls
Financial
Controls
Fraud
Prevention
The term Internal Financial Controls (IFC)as per Companies directors who have to satisfy themselves on the integrity and
Act, therefore,is all pervasive in an organization and encompasses robustness of financial controls and report concerns about
Operational Controls, Financial Controls and Fraud prevention. suspected fraud,unethical behavior or violation of company’s
Code of Conduct , thereby placing specific responsibility on
The Code for Independent Directors provided in Schedule IV independent directors.
to the 2013 Act places specific responsibility on the independent

INTERNAL CONTROL
As per section 177 of the 2013 Act, the Audit Committee of the Boardis required to evaluate the internal financial controls and
risk management systems in the company.
Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014 requires the Board Report of all companies to state the details in respect
of adequacy of internal financial controls with reference to the financial statements.
Statutory auditors are also required to give an independent assessment report on the adequacy and operating effectiveness of IFC
over financial reporting. The reporting by the auditors is mandatory for financial years beginning on or after 1stApril 2015.
The scope and responsibilities can be summarized separately as below:
The Guidance note issued by the Institute of Chartered Accountants of India on “Audit of Internal Financial Controls over Financial
Reporting” has stated that the auditors’ responsibility will be limited to express an opinion on the effectiveness of the company’s
internal financial controls (IFC) over financial reporting.Thus the onus for assuring efficiency and effectiveness in the business
lies with its management.
Key elements in the process of implementationof Internal Controls
1. Tone at the top:
An overall attitude towards internal controls and its importance in the organisation is to be infused by top management. People
are made aware of the environment through words and actions. This often starts with the vision and values of the business and the
actions of the board, also called ‘tone at the top’.

2. Information systems: Steps for implementation of controls
The first step in implementing internal controls is to perform
Information systems are the methods and records used a risk assessment to identify all areas of risk and exposure in
to identify, collate, analyse, calculate, classify, record and the business. Next, controls are designed to address these risks.
report transactions and other events that affect a business A recommended approach for designing internal controls is to
and to maintain accountability for assets, liabilities, revenue utilize a controls framework, such as the COSO framework. To be
and expenditures. These systems are not just the computer effective, an internal control system must also be monitored and
systems but general accounting and office procedures, and also assessed regularly to ensure that the system is working properly.
include other associated systems such as performance reviews, This includes performing internal audits and external audits.
distribution and manufacturing systems.
The following are the steps involved in the implementation
3. Control policies and procedures: process:
These are the policies and procedures that have been put in 1. Scoping – It is imperative that internal controls be imbibed
place to ensure that owners and managers can take the correct at all levels. However, at the initial stage the organization may
action to ensure the business achieves its objectives.Procedures build it by using scoping technique. The objective of scoping is
explain the how, why, what, where and when for any set of to identify and define the scope of the exercise. The scoping is
actions. normally done at 3 levels,
Criteria required
1st- Entity level scoping – The business units / regions /
Each internal control procedure is designed to fulfil at least one countries to be covered
of these eight criteria: 2nd- Process level scoping – The Corporate functions/Process
cycles to be covered
 Completeness – that all records and transactions are 3rd- GL level scoping – The General Ledger account codes to
included in the reports of business. be covered
 Accuracy – the right amounts are recorded in the correct Quantitative considerations like % of PAT or Turnover and
accounts. Qualitative considerations like Size andComposition, Complexity
of transactions etc. are factored in while deciding upon the scope.
 Authorisation – the correct levels of authorisation are in
place to cover such things as approval, payments, data 2.Process Level Control Documentation – Following
entry and computer access. documents are prepared,
 Validity - that the vendors invoice is for work performed a. Process Description and Flow (PDF) – it is a detailed
or materials received and the business has incurred the narrative of the steps involved in the process along with
liability properly. the diagrammatical representation of the process flow,
b. Risk and Control Matrix (RCM) – it is a matrix which
 Existence – of all assets and liabilities. identifies the risks involved in the process and the controls
that exist to mitigate those risks. Gaps if any are also
 Handling errors – that errors in the system have been highlighted.
identified and processed.
A Control should have the below mentioned attributes,
 Segregation of duties – to ensure maker-checker  What is the Control ?
responsibilities are kept separate. For example, the person  How is the Control performed ?
authorising receipt of materials does not also authorise
 Who performs the Control ? (Role/Title)
payment to supplier.
 How often the Control is performed ?
 Presentation and disclosure – timely and accurate  Who reviews the Control ? (Role/Title)
preparation of financial reports in conformity with  Where is the Control performed ?
generally accepted accounting principles.

INTERNAL CONTROL
3. Design adequacy testing(DAT)– is performed to assess Relevance in Cost Accounting and Audit Assurance
design adequacy of controls and also to assess any absence of Accounting transactions form the basis of financial reporting
control for the risks identified. The steps involved in this process like Profit and Loss account, Balance sheet, Cash flow and other
are, disclosure reports. In an integrated accounting environment,
a. Understanding the control from the design adequacy point these transactions also form the basis for preparation of cost
of view statements like Quantitative disclosures, Cost sheet and other
b. Gathering evidence and satisfying about the existence of disclosures.
the control
c. Identifying controls, the failure of which may result in The Companies Act, 2013 mandates that the Directors’
material misstatement or fraud Responsibility Statement to:
d. Report on design deficiency of controls for remedial action.  confirm laying down, adequacy and operating effectiveness
of IFC (listed Cos.) [Sec 134 (5)(e)]
4. Operational Effectiveness Testing (OET) – The objective of
OET is to assess whether the controls are operating consistently  confirm systems devised to ensure compliance to all
across locations over a period of time. OE testing may be applicable laws and adequacy and operating effectiveness
carried out by independent agency within the organisation of such systems [Sec 134 (5)(f)]
(e.g. internal audit) or by external experts. The testing is done
using representative sampling based on the ‘testing strategy’ In order to enable the Directors to comment on the Internal
adopted. Evidences in the form of screen shots, negative test Financial Controls, companies are required to complete detail
results, documentary evidences etc. are relied upon for testing. documentation of all major processes, identify the risks and
The results of OETwill show a control as either ‘Effective’ or ensure the adequacy and operating effectiveness of the controls.
‘Ineffective’. The major processes typically coversPurchase to Pay (PTP), Order
to Cash (OTC), Inventory (INV), Fixed Assets (FAS), Employee
5. Remediation of Gaps – The gaps identified during the DAT Payments (EMP), Financial Closure and Reporting (FCR) and
or OET stages are to be remediated. The process would involve Taxation (TAX).
instituting appropriate controls and ‘process owners’ acceptance
of the same. On remediation, OE testing to be performed again For instance, a representative PTP process flow diagram will
to ensure that the controls are “Effective”. be as below;

The following is an illustrativedocumentation format of a few PTP sub-processes,involving identification of sub-processes and the
risks and controls involved,
Risk of
Sub Risk Type of
Control Description Control Evidence Material Mis-
Process Description Control Fraud
statement
Vendor Unauthorized Vendor details are ob- Vendor registration Preventive Yes No
Master / fictitious tained by Buyer and documents, access
vendor mas- given to Accounts rights in system
ter created or Manager for updating
amendments
in the vendor Modifications based Access rights in Preventive Yes No
master on Invoice, cancelled system, cancelled
copy of cheque, etc. cheque, communica-
by Accounts Officer. tion from vendor.
Vendor payments dis-
abled till approval by
Accounts Manager.
Independent review Review email / work- Detective Yes No

of edit log by Head of ing papers
Accounts
PO PR / PO cre- PO’s by authorised- Access control for Preventive Yes No

Creation ation / amend- Buyers only based on placing and approv-
ments may not PPO initiated and- ing PO in system,
be authorized authorised by user workflow of user de-
departments as per partment for raising
CompanyAuthorisa- PPO, approval matrix
tion Guidelines and in system, negative
entered in system testing
Material Material re- GRN to be verified by System screenshot – Preventive Yes Yes
Receipt ceived may not stores with PO for item linkage of GRN with
be accurately description, quantity, PO
and complete- value etc. in system.
ly captured in Without PO, GRN can-
the system not be generated.
Proof of delivery to be LR/BL/ABL Preventive Yes Yes
obtained on receipt by
Stores
Stores in-charge to do Physical count report Preventive Yes Yes
physical count of in- signed by Stores in-
ventory on receipt charge
Maintenance of Cost Records go beyond financial reporting. (1) Every company under these rules including all units and
Cost Records means books of account relating to utilization of branches thereof, shall, in respect of each of its financial year
materials, labour and other items of cost as applicable to the commencing on or after the 1st day of April, 2014, maintain cost
production, processing, manufacturing or mining activities of the records in ‘form CRA1’.
company.
(2) The cost records referred to in sub-rule (1) shall be
Rule 5 of the Companies (Cost Records and Audit) Rules, 2014 maintained on regular basis in such manner as to facilitate
defines the requirements for maintenance of records as, calculation of per unit cost of production or cost of operations,

INTERNAL CONTROL
cost of sales and margin for each of its products and activities the Institute of Cost Accountants of India, with the approval of
for every financial year on monthly or quarterly or half-yearly or the Central Government.)
annual basis.
The Institute of Cost Accountants of India is in the process of
(3) The cost records shall be maintained in such manner so as issuing the Standards of Cost Auditing (SCA’s) with necessary
to enable the company to exercise, as far as possible, control over approval of the Central Government. The SCA-116 (awaiting MCA
the various operations and costs to achieve optimum economies approval) –“Communicating Deficiencies in Internal Control to
in utilisation of resources and these records shall also provide those charged with Governance and Management”, deals with
necessary data which is required to be furnished under these internal controls in cost accounting area.
rules.
The SCA-116 defines Internal Control as “The process designed,
CRA-1 provides particulars relating to the ‘Items of Costs’ to implemented and maintained by those charged with governance,
be included in the Books of Accounts. There are various records management and other personnel to provide reasonable
like machine utilization, under recovery workings, idle time assurance about the achievement of an entity’s objectives with
monitoring, losses due to rework/rejection, product/project regard to reliability of cost and financial reporting, effectiveness
wise allocation of overheads etc. which are not directly relevant and efficiency of operations, and compliance with applicable laws
for financial accounting but are the core for Cost Accounting. and regulations.”
Internal Control documentation for these processes may not
be done by many organisations as they are normally not The SCA also mentions that the cost auditor is required to
covered within the scope of audit of financial statements for obtain an understanding of internal control relevant to the audit
IFC over Financial Reporting. to help him to,
However, the Companies Act, 2013 has vide sections 143(3)  Identify and assess the risks of material misstatement
(i) and 143(14)(a), placed the onus on the Cost Auditor to  Design adequate audit procedures
report whether the company has adequate internal financial  Communicate about deficiencies identified during the
controls system in place and the operating effectiveness of audit
such controls.
The SCA suggests areas that need to be assessed for internal
143 (3) (i) The auditor’s report shall also state whether the control as enlisted below:
company has adequate internal financial controlssystem in place
 Selection and application of cost accounting policies
and the operating effectiveness of such controls;
 Material misstatements in the measurement, classification,
143 (14) The provisions of this section shall mutatis mutandis allocation, apportionment and absorption of costs
apply to—(a) the cost accountant in practice conducting cost
 The susceptibility to loss or fraud relating to
audit under section 148;
misappropriation of assets or overvaluation or under-
The cost auditor during his assessment of IFC can rely on valuation of inventories
the work done by management to establish adequacy and
 The subjectivity and complexity in determining the quantity
effectiveness of IFC and also take note of the (financial)
auditor’s comment from their independent assessment. The or value of consumption of raw materials and other inputs
cost auditor, however, has to independently assess the process effecting true and fair value of COP, COS and margin for
documentation, risk assessment and adequacy and effectiveness
each product/service.
of controls relevant to the maintenance of cost records and cost
accounting in order to satisfy the requirements of sections 143(3)  Significant transactions with related parties
(i) and 143(14)(a) of the Companies Act 2013.  Significant management estimates
 Period-end cost reporting framework
Section 148(3) of the Companies Act, 2013 states – “Auditor
conducting the cost audit shall comply with the cost auditing  Significant transactions outside the entity’s normal course
standards.”(For the purposes of this sub-section, the expression of business.
“cost auditing standards” mean such standards as are issued by

The SCA also provides an appendix to indicate the flow to be followed for identifying and reporting of deficiencies in Internal Contol
Audit of Cost Records performing the various operational activities.

To comply with the requirements of the Companies Act and
the upcoming SCA’s, it is pertinent that the cost auditor is geared Theapproach is explained by way of illustration of a sample
up to assess and report on the Internal control in the area of Cost statement preparation,
maintenance of cost records and cost accounting and reporting.  Product / Project Costing Statement – this is a Mega process
and can be divided into Major processes and their sub-processes
There are 3 key pre-requisites for Internal Control Review in as indicated in the chart below
Cost Accounting and Reporting. They can be called the 3 P’s.
 Policy – Cost accounting policy  Process Documentation and Flow (PDF) provides a detailed
understanding of process control check points
 Processes – The processes involved in manufacturing /
construction and the business operating processes.  Risk and Control Matrix (RCM) narrates the risks identified
 Procedures – Standard operating procedures (SOP’s) for and controls built-in
Mega
Process
MajorProc
esses
Sub
Processes
For each of the sub-processes, a few illustrative controls are indicated in the next page:

INTERNAL CONTROL
CAPACITY DETERMINATION RCM (an example)
COST CENTER / COST OBJECT / COST DRIVER RCM (an example)

OVERHEADS RECOVERY RCM (an example)
NON-COST ITEMS RCM (an example)
Conclusion process of his audit,in order to form an opinion on the internal

The essence is to look beyond the traditional methods of control over maintenance of cost records and cost statements.
auditing the cost records. The cost auditor therefore needs to Needless to mention, he has to have a clear understanding of the
explain the process and legal requirements in detail and impress business environment, industry practices, risks and controls and
upon the auditee to develop Process Description and Flow (PDF) the IT framework in place. The SCA’s released / to be released by
and Risk and Control Matrix(RCM) for all processes relating to the Institute and the mandate of the Companies Act, 2013 are the
cost accounting. It is now imperative for the Cost Auditor to arms to help and guide the costauditor to conduct his audit and
look in-depth into all aspects of internal control relating to cost he must use them with utmost vigor.
recordsof the auditee company, assess his audit plan, design
effective audit strategies and document evidences during the [email protected]
FOR ATTENTION OF MEMBERS

“CD of List of Members, 2016 will be made available for sale to the
Members at a price of Rs.100/- per copy. Members interested to procure
the same may remit Rs.100/- by Demand Draft/Cheque drawn in favour
of ‘The Institute of Cost Accountants of India’, payable at Kolkata,
addressed to the Secretary, ICAI.”

GST
GST Audit: Desirable by all stakeholders
“Are you ready for

GST AUDIT ”
Goods and Services Tax (GST) is the hottest topic amongst the accounting & tax
professionals, Govt Taxation officials and every trade and business segments in India.
GST has gained so much importance as it will be touching each and every person
buying or selling any goods or providing or receiving any services in India. Corporate
is looking to professionals like us to advise on practical approach on GST. The Cost
Accountants will be more affected by GST law, as it is opening new area of practice
in the form of GST audit, apart from consultation for implementing GST law in the
country.
CMA Subhash C Agrawal CMA Nagendra Saini

Practising Cost Accountant Assistant Manager
Subhash Agrawal& Co. (Finance and Accounts)
Former Chairman of NIRC of Machino Plastics Limited
The Institute of Cost Accountants (Joint Venture with Maruti Suzuki
of India, New Delhi India Ltd) New Delhi

G
ST is introduced to simplify the indirect Law. It provides that every registered taxable person shall keep
tax laws by subsuming various tax laws and maintain, at his principal place of business, as mentioned in
like, Value Added Tax (VAT), central sales the certificate of registration, a true and correct account of
tax, service tax, excise duties, CVD and
SAD under custom duties, luxury Tax, i) production or manufacture of goods,
Entertainment Tax, etc.. The problem ii) inward or outward supply of goods and/or services,
of complex indirect taxation structure is iii) stock of goods,
expected to improve by adopting the GST. iv) input tax credit availed,
v) output tax payable and paid,
Actually implementation and managing the GST more vi) such other particulars as may be prescribed in this behalf.
effectively and efficiently will improve complex structure of
indirect taxation system. There will be much scope for tax Where more than one place of business is specified in the
professionals to interpret and implement GST for the benefit certificate of registration, the accounts relating to each place of
of stakeholders. It won’t be out of context to mention that business shall be kept at such places of business concerned.
there is only one Medicinal Herb/ solution i.e. “GST Audit”
which can be used as a game changer to manage the GST The registered taxable person may keep and maintain such
compliances in the most efficient way. accounts and other particulars in the electronic form in the
manner as may be prescribed.
On the one hand GST Audit can play very important role to
examine/find out fraudulent GST practices by corporate, in the The Commissioner/Chief Commissioner may notify a class of
interest of Government to generate the revenue and prohibit all taxable persons to maintain additional accounts or documents
the unacceptable practices. for such purpose as may be specified. Where the Commissioner/
Chief Commissioner considers that any class of taxable persons
On the other hand, in favour of corporate, GST Audit may is not in a position to keep and maintain accounts in accordance
disclose non-compliance of GST rules and regulations outlined by with these provisions, he may, for reasons to be recorded in
the GST law for which organisations would have to pay penalties writing, permit such class of taxable persons to maintain accounts
to government or have to bear financial loss. GST Audit will also in such manner as may be prescribed.
reveal how organisations can manage the GST more effectively,
efficiently and convenient way so that organisation will grow from Audit under GST Law
financial darkness to brightness & prosperity day by day.
Meaning and purposes
Points to be noted:
Audit is defined by Section 2(14) of the Act, “audit” means
A) To understand the meaning of GST Audit and Purposes. examination of records, returns and other documents maintained
B) Brief detail about who can conduct the GST Audit and or furnished by the taxable person under this Act or rules made
who can be audited? thereunder or under any other law for the time being in force
C) A few notable points regarding GST Audit. to verify, inter alia, the correctness of turnover declared, taxes
D) A glance on points which should be considered while paid, refund claimed and input tax credit availed, and to assess
conducting the GST Audit. his compliance with the provisions of this Act or rules made
E) To understand Proformas and Annexures for conducting thereunder.
GST Audit.
Purposes
Model GST Law approved by GST Council in Nov., 2016
provides the circumstances and conditions of audit to be A) To analyse the correctness of turnover declared by the
conducted of a Registered Taxable Person. organisation.
B) To determine the GST accounted and paid correctly and
Accounts and Records accurately.
C) To determine the correctness of refund claimed
The accounts and records are to be maintained by Registered D) To determine the correctness of input tax credit availed,
Taxable person in accordance with Section 53 of the Model GST and

GST
E) To identify revenue leakages. prior to the conduct of audit in the prescribed manner.
F) To measure and assess the level of compliance with the (4) The audit by tax authorities shall be completed within a
provisions of this Act and rules by the registered taxable period of 3 months from the date of commencement of
person audit. However, if the Commissioner is satisfied that audit
in respect of such taxable person cannot be completed
Circumstances of conducting audit within 3months from the date of commencement of audit,
he may, for the reasons to be recorded in writing, extend
Section 53(4) of the Model GST Law provides that every the period by a further period not exceeding six months.
registered taxable person whose turnover during a financial The ‘commencement of audit’ shall mean the date on
year exceeds the prescribed limit shall get his accounts audited which the records and other documents, called for by the
by a cost accountant or a chartered accountant and shall submit tax authorities, are made available by the taxable person
to the proper officer a copy of the audited annual accounts, the or the actual institution of audit at the place of business,
reconciliation statement under sub-section (2) of section 39 whichever is later.
and such other documents in the form and manner as may be (5) During the course of audit, the authorised officer may
prescribed in this behalf. require the taxable person, (i) to afford him the necessary
facility to verify the books of account or other documents
It may be noted that the turnover limit is yet to be prescribed as he may require and which may be available at such
exceeding which the audit shall be mandatory. place, (ii) to furnish such information as he may require
and render assistance for timely completion of the audit.
Section 39(2) provides that every registered taxable person (6) On conclusion of audit, the proper officer shall, within
who is required to get his accounts audited under sub-section thirty days, inform the taxable person, whose records are
(4) of section 53 shall electronically furnish, along with the audited, of the findings, the taxable person’s rights and
annual return under section 39(1), the audited copy of the annual obligations and the reasons for the findings.
accounts and a reconciliation statement, reconciling the value of (7) Where the audit conducted by tax authorities results in
supplies declared in the return furnished for the year with the detection of tax not paid or short paid or erroneously
audited annual financial statement, and such other particulars refunded, or input tax credit wrongly availed or utilised,
as may be prescribed. the proper officer may initiate action u/s 66 or 67 to
determine tax and issue order for demand and recovery
Various formats of reconciliation statements as provided of tax.
by GST Council are given in this article, basically providing
reconciliation of data submitted in GST returns with the financial Special audit by Cost Accountants (Section 64)
statements and rules made under the Act.
(1) If at any stage of scrutiny, enquiry, investigation or
In addition to the above audit, Model GST Law provides any other proceedings before him, any officer not below
the audit to be conducted by tax Authorities (Section 63), the rank of Deputy/Assistant Commissioner having
special audit by Cost Accountants or Chartered Accountants regard to the nature and complexity of the case and
after the direction of Commissioner (Section 64) and audit interest of revenue, is of the opinion that the value
by CAG (Sec.65) has not been correctly declared or the credit availed
is not within the normal limits, he may, with the prior
Audit by tax authorities (Section 63): approval of the Commissioner, direct such taxable
person by a communication in writing to get his records
(1) The Commissioner of CGST/Commissioner of SGST or any including books of account examined and audited by a
officer authorised by him, by way of a general or a specific cost accountant or a chartered accountant as may be
order, may undertake audit of any taxable person for such nominated by the Commissioner in this behalf.
period, at such frequency and in such manner as may be (2) The cost accountant or chartered accountant so
prescribed. nominated shall, within the period of ninety days, submit
(2) The tax authorities may conduct audit at the place of a report of such audit duly signed and certified by him
business of the taxable person and/or in their office. to the said Deputy/Assistant Commissioner mentioning
(3) The taxable person shall be informed, by way of a notice, therein such other particulars as may be specified. The
sufficiently in advance, not less than 15 working days, and proper officer may, on an application made to him in this

behalf by the taxable person or the cost accountant or and checks as may be necessary to safeguard the interest
chartered accountant or for any material and sufficient of revenue.
reason, extend the said period by another ninety days. (2) Every person in charge of such place of business shall, on
(3) The provision of special audit shall have effect demand, make available to the authorised officer or the
notwithstanding that the accounts of the taxable person audit party deputed by the Additional/Joint Commissioner
have been audited under any other provision of this Act of CGST or SGST or a cost accountant or chartered
or any other law for the time being in force or otherwise. accountant nominated under section 64, as the case may
(4) The taxable person shall be given an opportunity of being be:-
heard in respect of any material gathered on the basis
of special audit, which is proposed to be used in any (i) the records as prepared or maintained by the registered
proceedings under this Act or rules made thereunder. taxable person and declared to the CGST/SGST
(5) The expenses of, and incidental to, the examination officer as may be prescribed;
and audit of records under special audit, including the (ii) trial balance or its equivalent;
remuneration of such cost accountant or chartered (iii) Statements of annual financial accounts, duly audited,
accountant, shall be determined and paid by the wherever required;
Commissioner and that such determination shall be final. (iv) cost audit report, if any, under section 148 of the
(6) Where the special audit results in detection of tax not Companies Act, 2013 (18 of 2013);
paid or short paid or erroneously refunded, or input tax (v) the income-tax audit report, if any, under section 44AB
credit wrongly availed or utilised, the proper officer may of the Income-tax Act, 1961 (43 of 1961); and
initiate action under section 66 or 67, to determine tax (vi) any other relevant record,
and issue order for demand and recovery of tax.
for the scrutiny of the officer or audit party or the cost
Power of CAG to call for information for audit (Section 65) accountant or chartered accountant, as the case may be, within
The proper officer shall, upon request made in this behalf, a reasonable time, not exceeding fifteen working days from the
make available to the Comptroller and Auditor General (CAG) of day when such demand is made, or such further period as may
India or an officer authorised by him, information, records and be allowed by the said officer or the audit party or the cost
returns furnished under the Act, required for conduct of audit accountant or chartered accountant, as the case may be.
as required under the Comptroller and Auditor General’s (Duties,
Powers and Conditions of Service) Act (56 of 1971). It may be noted that Cost Audit Report has been given due
importance under the GST Law.
Access to business premises
Please Note:
The Registered taxable person has to provide access to the
business premises and to all records as may be required by the  15 Days prior intimation is required before conducting
person doing the audit, as provided u/s 83 of the Model GST Law: the GST audit.
 The audit should be completed within 3 months from the
(1) Any CGST/SGST officer authorized by the Additional/Joint date of commencement of audit or within a further period
Commissioner of CGST or SGST shall have access to any of a maximum of 6 months subject to the approval of the
place of business of a registered taxable person to inspect Commissioner
books of account, documents, computers, computer  The auditor will have to submit the report within 90 days
programs, computer software (whether installed in a or within the further extended period of 90 days.
computer or otherwise) and such other things as he may  The expenses for examination and audit including the
require and which may be available at such place, for the remuneration payable to the auditor will be determined
purposes of carrying out any audit, scrutiny, verification and borne by the Commissioner
A Glance on Points to be Considered while Conducting GST Audit
Audit Points Reconciliations to Examine/Check Accuracy
Total outward supplies Reconciliation of outward supplies as per return and as per financial statement must be done.

GST
Audit Points Reconciliations to Examine/Check Accuracy
Total Inward supplies Reconciliation of Inward supplies as per return and as per financial statement must be done.
Total tax liability on output Reconciliation of tax liability as per Return and as per Rules prescribed in GST Act should be
supply and supplies liable to done.
reverse charge
Input tax credit availed during Reconciliation of Input tax credit availed during the year as per Return and as per Rules pre-
the year scribed in GST Act must be done.
Payment of tax liability on Reconciliation of payment of tax liability (utilising cash in cash ledger, utilising input tax credit
output supply and supplies ledger &TDS), as per Return and as per financial statement must be done.
liable to reverse charge
GST Deposit challans Reconciliation of GST deposit challans, as per return and as per financial statement must be
done.
Transfer of TDS Amount from Reconciliation of Transfer of TDS amount from deductors, as per return and as per financial
deductors statement must be done.
GST Refunds Reconciliation of GST Refunds (Refund claim pending at start of the year, Refund claim filed
during the year, Refund claim received during the year, Refund to be received at the end of year
),as per return and as per financial statement must be done.
Amount paid under pro- Reconciliation of amount paid under protest/ as pre-deposit against demand, as per return and
test/ as pre-deposit against as per financial statement must be done.
demand
Balances of GST payableas on Reconciliation of balance of GST payable as per returns and as per financial statement must be
date of financial statements done.
Balances of Input Tax Creditas Reconciliation of balance of Input Tax Credit as per returns and as per financial statement must
on date of financial statments be done.
TDS deducted Reconciliation of balance of amount of TDS deducted as per returns and as per financial state-
ment must be done.
Apart from above, the reconciliation of Income and expenditures shall also be made as per the formats provided.
Proformas and Annexures for GST Audit.
FORM GST 9A
(See Section__ of the Central/ State Goods and Services Tax Act, 2016 and Rule __of the Central/ State Goods and Services
Tax Rules, 2016)
Certified that I/we ..................... being a ...................... have audited the accounts of _<<Name>>_ at <<Address>> having a regis-
tration number (GSTIN) _________ for the year ending 31st March 20__ and subject to my/our observations and comments
about non-compliance, short comings and deficiencies in the returns filed by the Taxable person, as given in the attached report,
The books of accounts and other related records and registers maintained by the taxable person are sufficient for
1 the verification of the correctness and completeness of the returns filed for the year;
The total turnover of outward supplies declared in the returns includes all the outward supplies effected during the
2
year;
The total turnover of inward supplies declared in the returns includes all the inward supplies made during the
3
year;
The deductions from the total turnover including deduction on account of sales /supplies returns claimed in the
4
returns are in conformity with the provisions of the law;
The adjustment to turnover of outward supplies and inward supplies is based on the entries made in the books of
5 account maintained for the year;

The stakeholders are eagered to know GST Audit meaning & purposes, GST Auditing Com-
pliance, how GST documents and records will be checked, verified and authenticated? What
documents will be required for GST audit? Under what circumstances a special audit can be
instituted? Who can serve the notice for special audit? What are the rights and responsibilities
of an auditor? What are the obligations of taxable person when he receives the notice of audit?
Who can conduct audit of taxpayers under GST? Who can be audited? Whether any prior inti-
mation is required before conducting the audit? What is the period within which the audit is
to be completed? What would be the action by the proper officer upon conclusion of the audit?
Who will bear the cost of special audit? What action the tax authorities may take after the
special audit?
The classification of outward goods/services supplied and inward supplies, rate of tax applicable and computation
6 of output tax and input tax and net tax payable as shown in the return is correct;
The computation of classification of goods supplied, the amount of input tax paid and deductions of input tax
7 credit claimed and reversed in the return is correct and in conformity with the provisions of law;
8 Other information given in the returns is correct and complete.

Taxable Person Information
(A) GENERAL INFORMATION

1 Name of the taxable person
2 GSTIN
3 Address
3(a) Principal place of business
<<to be given only if there is change in the address
during the period as compared to the registration
3(b) Additional place of business certificate>>
Details of any branch or unit in the State having a different
4(a) registration number (GSTIN)
Details of any branch or unit in other State having different
4(b) registration number (GSTIN)
5 Nature of business
6(a) Description of 10 major goods sold/ services provided
6(b) New business activity
7 Constitution of the business
Names and address of the Proprietor/Partners/ Directors
8 as on date of filing of Audit Report
9 Details of Registration with other departments
9(a) - Income Tax Permanent Account Number
9(b) - Importer Export Code Number
9(c) - Corporate Identity Number
10 Particulars of all bank accounts of the taxable person
10(a) Name of the bank and branch
10(b) Account number
11 List of books of accounts maintained

GST
12 List of books of accounts examined

13(a) Name and version of accounting software used (if electron-
ic records being maintained)
13(b) Change in accounting software, if any
14(a) Method of valuation of opening and closing stocks
14(b) Change in method of valuation of stock, if any
(B) OTHER INFORMATION

1(a) Taxable person has filed all the returns as per given peri- Yes/No
odicity
1(b) Please state exceptions along with details of interest, late
fee and penalty paid, if any
2 Taxable person has maintained stock register Yes/No
3 Returns applicable to the Taxable person
GSTR 1 Yes/No
GSTR 2 Yes/No
GSTR 3 Yes/No
GSTR 4 Yes/No
GSTR 5 Yes/No
GSTR 6 Yes/No
GSTR 7 Yes/No
GSTR 8 Yes/No
Other returns, please select Yes/No
Summary of Reconciliation Statements

S.No. Particulars Consolidated Amount as per Difference Reference
amount as per audited financial
annual return statements (for the
GSTIN)
A) Details of Supplies and corresponding
taxes
1 Total outward supplies Annex 1
2 Total inward supplies Annex 2
Total tax liability on output supply

3 and supplies liable to reverse charge Annex 3
Input tax credit availed during the
4 year Annex 4
B) Payment of tax liability on output supply

and supplies liable to reverse charge
By utilising
5 cash in cash ledger Annex 5

6 By utilising input tax credit ledger Annex 5
7 By utilising TDS in cash ledger Annex 5

C) Other details
8 Deposit by challans Annex 6
9 Transfer of TDS from deductors Annex 7

10 Refunds Annex 8
Amounts paid under protest/ as

11 pre-deposit against demand Annex 9
Balances as on date of financial

12 statements (GST payable) Annex 10
Balances as on date of financial

13 statements (Input Tax Credit) Annex 11
14 TDS deducted Annex 12
Annexure 1 - Reconciliation of Outward supplies

(including taxable supplies on account of time of supply being different from invoice date)
Particulars Amount Remarks
<<to be taken
Value of outward supplies as per
from Outward
returns (Section 15)
supplies sheet>>
Adjustments:
A) Difference in value of supplies
as per returns and financial state-
Amount Please specify briefly the details
ments on account of following
reasons:
the consideration, whether paid or payable, is not money, wholly or
15(4)(i): minus
partly
15(4)(ii): minus the supplier and the recipient of the supply are related
there is reason to doubt the truth or accuracy of the transaction value
15(4)(iii): Other reasons minus
declared by the supplier
business transactions in the nature of pure agent, money changer,
15(4)(iv): Special sectors plus/minus
insurer, air travel agent and distributor or selling agent of lottery
such other supplies as may be notified by the Central or a State Gov-
15(4)(v): Other notified cases plus/minus
ernment in this behalf
B) Adjustments (if not included in

financial statements)
any amount that the supplier is liable to pay but which has been
15(2)(a) minus incurred by the recipient of the supply and not included in the price
actually paid or payable for the goods and/or services

GST
the value, apportioned as appropriate, of such goods and/or services

as are supplied directly or indirectly by the recipient of the supply free
15(2)(b) minus of charge or at reduced cost for use in connection with the supply of
goods and/or services being valued, to the extent that such value has
not been included in the price actually paid or payable
royalties and licence fees related to the supply of goods and/or ser-
vices being valued that the recipient of supply must pay, either directly
15(2)(c) minus
or indirectly, as a condition of the said supply, to the extent that such
royalties and fees are not included in the price actually paid or payable
any taxes, duties, fees and charges levied under any Statute other
15(2)(d) minus
than the SGST Act or the CGST Act or the IGST Act
incidental expenses such as commission, packing, charged by the
supplier to the recipient of a supply, including any amount charged for
15(2)(e) minus/plus anything done by the supplier in respect of the supply of goods and/or
services at the time of, or before delivery of the goods or, as the case
may be, provision of the services
15(2)(f) minus subsidies provided in any form or manner, linked to the supply
15(2)(g) minus out of pocket expenses
any discount or incentive that may be allowed after the supply has
15(2)(h) plus/minus
been effected
Others (please specify) plus
C) Adjustments (if included in

discount allowed before or at the time of supply provided such dis-
15(3) count is allowed in the course of normal trade practice and has been
duly recorded in the invoice issued in respect of the supply
Others (please specify)
D) Adjustments (Differences on

account of time of supply)
Opening advances
Closing advances
Opening unbilled revenue
Closing unbilled revenue

Derived as per financial state-

ments
Effective turnover for present

State (Note 1)
Difference
Note:
Total turnover as per financial statements <<to be taken from audited financial statements>>
Less: Turnover pertaining to other states <<to be taken from audited financial statements>>
Add: Turnover of stock transfer outward
Effective turnover for present state

Annexure 2 –Reconciliation of Inward supplies
(Including taxable supplies on account of time of supply being different from invoice date)
Particulars Amount Remarks

<<to be taken from
Value of inward supplies as per
inward supplies
returns (Section 15)
sheet>>
Adjustments:
A) Difference in value of sup-
plies as per returns and finan-

cial statements on account of
following reasons:
15(4)(i): the consideration, whether paid or payable, is not money, wholly or
15(4)(ii): the supplier and the recipient of the supply are related
there is reason to doubt the truth or accuracy of the transaction value
15(4)(iii): Other reasons
declared by the supplier
business transactions in the nature of pure agent, money changer,
15(4)(iv): Special sectors
insurer, air travel agent and distributor or selling agent of lottery
such other supplies as may be notified by the Central or a State Gov-
15(4)(v): Other notified cases
ernment in this behalf
B) Adjustments (if not included

in financial statements)
any amount that the supplier is liable to pay but which has been
15(2)(a) incurred by the recipient of the supply and not included in the price
actually paid or payable for the goods and/or services
the value, apportioned as appropriate, of such goods and/or services
as are supplied directly or indirectly by the recipient of the supply free
15(2)(b) of charge or at reduced cost for use in connection with the supply of
goods and/or services being valued, to the extent that such value has
not been included in the price actually paid or payable
royalties and licence fees related to the supply of goods and/or ser-
vices being valued that the recipient of supply must pay, either directly
15(2)(c)
or indirectly, as a condition of the said supply, to the extent that such
royalties and fees are not included in the price actually paid or payable
any taxes, duties, fees and charges levied under any Statute other
15(2)(d)
than the SGST Act or the CGST Act or the IGST Act
incidental expenses such as commission, packing, charged by the
supplier to the recipient of a supply, including any amount charged for
15(2)(e) anything done by the supplier in respect of the supply of goods and/or
services at the time of, or before delivery of the goods or, as the case
may be, provision of the services
15(2)(f) subsidies provided in any form or manner, linked to the supply
15(2)(g) out of pocket expenses
any discount or incentive that may be allowed after the supply has
15(2)(h)
been effected

GST
Others (please specify) Eg. unbilled revenue, advances

C) Adjustments (if included in

discount allowed before or at the time of supply provided such dis-
15(3) count is allowed in the course of normal trade practice and has been
duly recorded in the invoice issued in respect of the supply
Others (please specify)
D) Adjustments (Differences on

account of time of supply)
Opening advances
Closing advances
Opening unbilled revenue
Closing unbilled revenue

Derived as per financial state-

ments
Effective turnover for present

State (Note 1)
Difference
Note:
Total turnover as per financial statements <<to be taken from audited financial statements>>
Less: Turnover pertaining to other states <<to be taken from audited financial statements>>
Add: Turnover of stock transfer Inward
Effective turnover for present state
Annexure 3 - Reconciliation of ‘Total tax liability’ on output supply and supplies liable to reverse charge
As per Annual return As per Auditor Difference
Particulars CGST SGST IGST Total CGST SGST IGST Total CGST SGST IGST Total Remarks
Tax liabilities

on:
Inter-State
NA NA NA NA NA NA
supplies
Intra-State
NA NA NA
supplies
Exports NA NA NA NA NA NA
Sales returns
Supplies lia-
ble to reverse
charge
Total

Annexure 4 - Reconciliation of ‘Input tax credit’ availed during the year
As per Annual return As per Auditor Difference
Input tax
credit
availed on:
Inter-State

supplies
Intra-State

supplies
Imports
Purchase

returns
Total
Annexure 5– Reconciliation of ‘Payment of Tax liability’ on output supply and supplies liable to reverse charge
As per return As per financial statements Difference
By Utilising
Cash in
Cash Ledger
By Utilis-
ing Input
tax Credit
Ledger
By Utilising
TDS in Cash
Ledger
Annexure 6 - Reconciliation of ‘Deposit by Challans’
Particulars CGST SGST IGST Total

Tax deposit by Challans as per returns
Tax deposit by Challans as per books of accounts
Difference
Reason for difference
Reason 1
Reason 2
Reason 3
Reason 4
Total

GST
Annexure 7 - Reconciliation of ‘Transfer of TDS’ from deductors

Amount of Transfer of TDS from deductors as per returns
Amount of Transfer of TDS from deductors as per financial statements
Difference
Reasons for difference
Reason 1
Reason 2
Reason 3
Reason 4
Total
Annexure 8 - Reconciliation of ‘Refunds’
As per return As per financial statements Difference

Refund claim
pending at start of
the year
Refund claim filed
during the year
Refund claim
received during the
year
Refund to be
received at the end
of year
Annexure 9 - Reconciliation of ‘Amounts paid under protest/ as pre-deposit against demand’

Amounts paid under protest/ as pre-deposit against demand as per returns
Amounts paid under protest/ as pre-deposit against demand as per financial state-

ments
Difference
Reason 1
Reason 2
Reason 3
Reason 4
Total

Annexure 10 - Reconciliation of ‘Balances as on date of financial statements (GST payable)’
Balance of GST payable as per returns
Balance of GST payable as per Financial statements
Difference
Reason 1
Reason 2
Reason 3
Reason 4
Total
Annexure 11 - Reconciliation of ‘Balances as on date of financial statements (Input Tax Credit)’

Balance of Input tax credit as per returns
Balance of Input tax credit as per Financial statements
Difference
Reason 1
Reason 2
Reason 3
Reason 4
Total
Annexure 12 - Reconciliation of ‘TDS deducted’

Amount of TDS deducted as per returns
Amount of TDS deducted as per financial statements
Difference
Reason 1
Reason 2
Reason 3
Reason 4
Total
Detail Of Income
A) Total value of supplies on which GST paid (inter-State Supplies)
Goods As per Annual Return As per Auditor
S.N Description HSN Code Tax Rate Taxable value IGST Tax Rate Taxable value IGST Reason for
differences
1
2

GST
Services As per Annual Return As per Auditor

Accounting Tax Taxable Taxable Reason for differ-
S.N Description IGST Tax Rate IGST
code Rate value value ences
1
2
3
B) Total value of supplies on which GST paid (intra-State Supplies)
S.N Descrip- HSN Tax Tax Tax Taxable Tax Tax Tax Tax Reason for
tion Code Rate Rate CGST value Rate Rate CGST SGST differences
CGST SGST CGST SGST
1
2
3
Ser-
vices As per Annual Return As per Auditor
S.N Descrip- SAC Tax Tax Tax Taxable Tax Tax Tax Tax Reason for
tion Rate Rate CGST value Rate Rate CGST SGST differences
CGST SGST CGST SGST
1
2
3
C) Total value of supplies on which GST paid (Exports)
S.N Description HSN Code Tax Rate FOB IGST Tax FOB IGST Customs Reason for
Value Rate Value Duty differences
1
2
3
Ser-
vices As per Annual Return As per Auditor
FOB Tax FOB Reason for
S.N Description SAC Tax Rate IGST IGST differences
value Rate value
1
2
3

D) Total value of supplies on which no GST paid (Exports)
S.N Description HSN Code Tax Rate FOB Value Tax Rate FOB Value Reason for differences
1
2
3
Ser-
As per Annual Return As per Auditor
vices
S.N Description SAC Tax Rate FOB value Tax Rate FOB Value Reason for differences
1
2
3
E) Total value of Other supplies on which no GST paid

As per Annual return As per Auditor
S.N Goods/service Value Value Reason for differences
1
2
F) Sales Returns
S.N Description HSN Code CGST SGST IGST Taxable CGST SGST IGST Reason for differences
value
1
2
3
G) Other Income (Income other than from supplies)
S.N Specify Head Amount Amount Reason for differences
1
2
3
Detail Of Expenditure
A) Total value of purchases on which ITC availed (inter-State)
S.No. Description HSN UQC Qty. Tax Tax- IGST Qty. Tax Taxable IGST Reason for
Code rate able credit rate value credit differences
value
1
2
3

GST
Ser-
As per Annual Return As per Auditor
vices
Taxable IGST Tax Taxable IGST Reason for differences
S.N Description Accounting code Tax Rate value credit Rate value credit
1
2
3
B) Total value of purchases on which ITC availed (intra-State)
S.N De- HSN UQC Qty. Tax- Tax Tax Tax Tax Qty. Tax Tax Tax Tax Reason for
scrip- Code able rate rate credit credit rate rate credit credit differences
tion value (CGST) (SGST) (CGST) (SGST) (CGST) (SGST) (CGST) (SGST)
1
2
3

S.N Descrip- SAC Taxable Tax rate Tax rate Tax credit Tax credit Taxable Tax rate Tax rate Tax credit Tax credit Reason for
tion value (CGST) (SGST) (CGST) (SGST) value (CGST) (SGST) (CGST) (SGST) differences
1
2
3
C) Total value of purchases on which ITC availed (Imports)

S.N Description HSN UQC Qty Tax rate CIF IGST Customs Qty Tax rate CIF IGST Customs Reason for
Code Val- duty paid Val- duty paid differences
ue ue
1
2
3
S.N Description SAC Tax Rate Taxable value IGST Tax Rate Taxable value IGST Reason for differences
1
2
3
D) Other Purchases on which no ITC availed
S.N Goods/service Purchase value Purchase value Reason for differences
1
2
3

E) Purchase Returns
S.N Description HSN Taxable CGST SGST IGST Taxable CGST SGST IGST Reason for
Code value value differences
1
2
3

S.N Description SAC Taxable CGST SGST IGST Taxable CGST SGST IGST Reason for
value value differences
1
2
3
F) Other Expenditure (Expenditure other than purchases)


S.N Specify Head Amount Amount Reason for differences
1
2
3
Conclusion: References:
GST Audit shall provide a tool ensuring due compliance of GST A)www.cbec.gov.in on 16th March, 2017.
for the benefit of all stakeholders. It will help in ensuring that the
GST is accounted and paid correctly and accurately, and shall B) www.caclubindia.com/articles/role-of-ca-and-cma-in-
be able to analyse the correctness of turnover declared by the gst--27608.asp, on 5 March 2017.
taxable person. GST Audit will determine the correctness of input C) https://gst.caknowledge.in/faq-assessment-audit-gst/ on 4
tax credit availed, and refund claimed. GST Audit will identify March 2017.
revenue leakages to the exchequer and will measure and assess D) taxheal.com/assessment-and-audit-under-gst.html on 2
the level of compliance with the provisions of the Act and rules March 2017.
by the registered taxable person. E) abcaus.in/gst/draft-model-gst-law-2016-audit-appearance-
by-ca-cma-cs.html, on 6 March 2017.
Goods & Services Tax is a big step taken by the government
towards reforming the Present Indirect Taxation System in India,
surely GST Audit will play role to the great extent for proper
and effective compliance of GST, and will be beneficial to all the [email protected]
stakeholders.

BANKING
relationship
marketing
in banks
relational aspect of marketing as is evident in the following
promotional efforts.
Sarajit Sardar Name of the Bank Promotional Campaign

Assistant Professor United Bank of India The Bank that begins with U
Vidyasagar Evening College
Kolkata United Commercial Bank Honours your trust
Allahabad Bank A tradition of trust
Union Bank Good people to bank with
State Bank of India Banker to every Indian
Bank of India Relationship beyond banking

CMA Dr. Biswajit Bhadra
Teacher-in -Charge Union bank Good people to bank with
Netaji Nagar College Federal bank Your perfect banking partner
Kolkata
T
HDFC bank Bank aapki mutthi mein
In addition to the above, the banks of today, be it private

he business environment in India has become or public, inevitably has a personal banking division headed by
more complex and competitive over the last a Relationship Manager, offers redeemable bonus points for
few decades with the introduction of LPG increased usage, provides facility of priority banking, has been
(liberalization, privatization, globalization). opening up touch points (SBI e-corner), are introducing digital
And it is this environment that forces application based mobile services (apps like Buddy), all these
different organizations to adopt innovative with a single motive, to establish, maintain and enhance a long-
marketing strategies-the most common being lasting mutually beneficial relational bond, to not only reach out
Relationship Marketing Strategy (RMS) which “strives to get the to, but also to retain customers. This has opened a new area of
firm close to the customers in order to enable it to accurately discussion, and in this respect, it is imperative to mention, that
and adequately discern and satisfy their needs” (Ndubisi et al, this needs to be cultivated in a more effective manner. Keeping
2005) (www.emeraldinsight.com/0265-2323.htm). A successful this in mind an effort has been made to search to what extent
‘firm-customer relationship’ enables the firm to gather exclusive some selected Kolkata based Indian banks are practising RMS
information about the customers’ needs and wants which is as a tool to retain customer. From below one can understand the
useful not only in serving the customers better but it also helps situation of the same.
firms to achieve a competitive edge over its peers and rivals.
Literature review
The environment of the banking business in India has
undergone a sea change over the last three decades with the The earliest known reference to influence of relationship on
liberalization policies of the successive governments. The marketing could be traced to an educator and economist of
complex and competitive environment has resulted in a shift of business administration Edmund Mcgarry’s (1951, 1953) writings
the customers’ attitude as they have become highly demanding on ‘Contactual Function’ of marketing. Mcgarry was of the view
in respect of the banking products and services and switching that ‘contactual’ information formed the basis of cooperation/
their loyalty according to their own sweet will. The high customer collaboration between buyer and seller. He opined that long-term,
turnover today is attributed to the fact that they have wider continuous relationship between buyer and seller help to develop
choice and easy access to multiple options owing largely to the a bond of mutual interest, besides mutual confidence and respect
technological revolution. Hence it has become necessary to can bring down the marketing cost by 10-20 percent. He further
devise comprehensive and all-inclusive marketing strategies from advocated that long-term cooperation/collaboration between the
‘reaching out to retaining’ of customers with a special focus on the seller and buyer is a mechanism to increase marketing efficiency
latter, which is discernible in their various marketing endeavours. from the seller’s point of view.
The banks which have predominantly promoted the In 1975 Richard Bagozzi, Professor of Behavioral Science in
transactional trait of its operation, of late are focusing on the Management, Ross School of Business, University of Michigan,

BANKING
put forward the idea that exchange relationship can fall into marketing practices and applied those to marketing proper.
three types of exchanges: restricted, generalized and complex.
Restricted exchanges are about reciprocal relationships To understand Relationship Marketing further especially
between two parties like customers and company or company in the banking branches of Kolkata the researcher has tried
representatives, generalized exchanges are about univocal to delve deeper into the subject through a thorough literature
reciprocal relationships between at least three actors like the review and propose a conceptual model involving relationship
middleman, the company and its customers, complex exchanges drivers affecting Relationship Marketing Strategy. Scholars and
are mutual relationships between at least three parties and are academicians have listed and theorized key relationship drivers/
the closest to the concept of relationship Marketing. constructs/variables like trust (Moorman et al., 1993; Morgan
and Hunt, 1994; Ndubisi, 2004), Commitment (Moorman et
The origins of modern relationship marketing can be traced al., 1993; Morgan and Hunt, 1994; Ndubisi, 2004), satisfaction
back to a passage by B. Schneider (1980) in which he observes: (Sheith et al., 1988), Conflict Handling (Dwyer et al., 1987),
“What is surprising is that researchers and businessmen empathy (Ndubisi, 2004) and many others through various
have concentrated far more on how to attract customers to marketing literatures.
products and services than on how to retain customers”. The
initial research was done by C Gronroos (1982) at the Swedish The variables chosen for the current study are Trust and
School of Economics who introduced what he called “interactive Commitment based on the following facts:
marketing”. In 1989 Gronroos wrote, marketing is a mutual
exchange and fulfillment of promises and it is through making (i) The variables find a mention in the promotional efforts of
promises and keeping them that trust develops and out of trust the banks as referred to earlier.
long-term relationships grow. L Berry (1983) a distinguished (ii) The mid level bank officials whom the researcher
professor of marketing at Texas A&M University and a former interviewed and who act as a link between the rank & file
President of American Marketing Association, coined the term supplying ground level information to the policy makers
“Relationship Marketing” (RM). Berry emphasized the importance stressed on the aforementioned traits.
of maintaining and enhancing the relationships with existing (iii) The customers spoken to by the researcher also
customers in addition to creating new customers. He suggested corroborated the fact that they give importance to the
five types of Relationship Marketing Strategies which are core variables chosen by the researcher.
service, relationship customization, service augmentation,
relationship pricing and internal marketing. First generation In the current study the influence of each of the aforesaid
marketing theorist Levitt (1983) at Harvard wanted to broaden the independent variable (Trust and Commitment) on the dependent
scope of marketing beyond individual transactions. In practice, variable i.e., RMS will be empirically tested. In other words the
RM originated in industrial and B-2-B markets where long-term conceptual framework of the following figure will be empirically
contracts have been quite common for many years. Academics tested.
like Jackson (1985) at Harvard re-examined these industrial
Figure 1 : Conceptual Framework
TRUST Ho1/Ha
1
RELATIONSHIP
MARKETING
Ho2/Ha2 STRATEGY
COMMITTMENT
INDEPENDENT VARIABLES DEPENDENT VARIABLE
Before deliberating on this issue it is necessary to have Trust was defined in ‘The Journal of Marketing Research’ by
some idea about the concept of trust and commitment. Christine Moorman et al (1992) as “the willingness to rely on

an exchange partner in whom one has confidence”. Gronroos Metropolitan area.
(1990) emphasized that the resources of the seller – personnel, Ha2: There exists a relationship between perceived Commitment
technology and systems – have to be used in such a manner that and RMS in selected banking branches in Kolkata
the customer’s trust in the resources involved and, thus, in the Metropolitan area.
firm itself is maintained and strengthened.
Research Methodology
Commitment is an important determinant of the strength of
a marketing relationship. Commitment, according to Morgan & A structured questionnaire was developed including some
Hunt, 1994, plays a central role in the relationship marketing selected items from previous studies. In addition interviews were
paradigm. In marketing literature Moorman et al., 1992 have conducted with officers of the banks selected for the study in
defined commitment as “an enduring desire to maintain a order to identify important aspects of Relationship Marketing to
valued relationship”. Thus commitment is enduring and implies assist development of questionnaire items.
a positive evaluation of a long-term relationship (Bowen &
Shoemaker, 1998; Moorman et al, 1992; Morgan & Hunt, 1994). The questionnaire has two components- Part A and Part B.
Consequently, Commitment is often seen as a key to long-term
customer retention (Amine, 1998). This further implies a higher The first part (i.e., Part A) contains five items to gather some
level of obligation to make a relationship succeed and to make it relevant biographical information about the respondents viz.,
mutually satisfying and beneficial (Gundlach et al., 1995; Morgan gender, age, qualification, annual income, and number of years
and Hunt, 1994). Since, commitment is higher among individuals of association with the bank.
who believe that they receive more value from a relationship,
highly committed customers should be willing to reciprocate The second part (i.e., part B) contains 15 items to gather
effort on behalf of a firm due to past benefits received (Mowday the responses (i.e., the perceptions) of respondents on a five
et al., 1982) and highly committed firms will continue to enjoy the point scale (the response alternatives being, strongly disagree/
benefits of such reciprocity. disagree/neither agree nor disagree/agree/strongly agree)
with respect to three aspects viz., trust [6 sub-variables viz.,
Objective of the study Security of Transaction, Reliable Promise, Consistent Service,
Respect of Customers, Fulfills Obligation, Confidence in Service],
The objective of this study is to investigate the influence of commitment [4 sub-variables viz. Flexibility1, Adjustment,
selected independent variables (trust, commitment) on the Flexibility2 and Personalised Services] and relationship marketing
dependent variable (relationship marketing strategy) of the strategy [5 sub-variables viz. Satisfaction, Relationship Benefits,
selected banking branches in Kolkata Metropolitan area. Cooperation, Bond, Experience].
Research Hypotheses The primary data collected have been intelligently collated,
analysed and tabulated using appropriate statistical techniques
To give effect to the problem statement a number of null with the help of a statistical software package, viz., SPSS (version
hypotheses have been formulated, stating that no relationship 20).
exists, as depicted in the conceptual diagram figure. Alternative
hypotheses have been formulated stating that relationship exists, Data Sources
as depicted in conceptual diagram.
The researcher has chosen the public sector banks designated
Specifically the null and alternative hypotheses are: as scheduled commercial banks headquartered at Kolkata viz.
United Commercial Bank, United bank of India and Allahabad
Ho1: There is no relationship between perceived Trust and RMS Bank. The reason being:
in the selected banking branches in Kolkata Metropolitan
area. The study is based on banks in Kolkata.
Ha1: There exists a relationship between perceived Trust and
RMS in selected banking branches in Kolkata Metropolitan It helped the researcher design the questionnaire after talking
area. to the officials who are involved in devising marketing
Ho2: There is no relationship between perceived Commitment strategies and policies.
and RMS in selected banking branches in Kolkata

BANKING
It is basically a perception study. Hence it was essential to “Regression” is used to denote estimation or prediction of
identify the customers interacting frequently with the bank. the average value of one variable for a specified value of other
Speaking with the aforementioned officials helped the researcher variable.
to identify such customers.
Pilot Survey
There are 351 branches of UCO (79), UBI (North + South =118)
and Allahabad (154) Bank in Kolkata. 35 branches were chosen The researcher conducted a pilot survey to verify the strength
(representing 10% of the number of branches) from among the of the measuring instrument viz., the questionnaire. A total of 50
351 branches in the following manner. The branches were selected participants were chosen for the pilot test and reliability test was
based on the premise of Convenience Sampling. performed using Cronbach’s Alpha.
United Commercial Bank 8 branches Reliability of a measure is an established tool for testing both
United Bank of India 12 branches consistency and stability. Consistency indicates closeness of
the items measuring a concept. Cronbach’s Alpha is a reliability
Allahabad Bank 15 branches coefficient that indicates how well the items in a set are positively
correlated to one another. The coefficient can range between
Total 35 Branches 0 and 1. Closer the value of item to 1 greater is its reliability/
The customers chosen are those having current accounts consistency. In the present (pilot) study the three Key Constructs
enjoying cash/credit accounts/facilities, who utilize the Trust (6 items), Commitment (4 items) and Relationship Marketing
aforementioned accounts for financing their working capital Strategy (5 items) have coefficient scores of 0.835, 0.792, 0.748
requirement and the accounts are active and transactions are which indicates that the items within the Key Constructs are
regular in nature. closely related, hence are consistent/reliable.
Information relating to 5508 Cash/Credit account holders Empirical Survey and its Findings
was collected. Out of them contact details [telephone numbers
(landline and cellular), e-mail i/ds] of 550 (i.e 10% of 5508) The researcher then proceeded with the analysis of the data
account holders could be gathered and contacted to. 384 of the main survey. The Reliability test was performed using
respondents (i.e 70% of 550) actually responded out of which Cronbach’s Alpha on the responses of the 312 customers. The
312 (57% of 550) completed questionnaires were selected. coefficient scores of 0.754, 0.720 and 0.722 respectively of the
independent (Trust and Commitment) and dependent variable
Tools for Data Analysis (Relationship Marketing Strategy) shows that the responses are
consistent and reliable.
Crosstabs and Chi-square -The researcher performed the
Chi Square test for independence of attributes between two Cross tabulation and Chi Square test were then performed in
categorical variables which uses cross classification table two stages to find out whether and how the sub variables (referred
to examine the nature of relationship between the variables to earlier) of independent variables (trust, and commitment)
(independent, and dependent). and the sub variables (referred to earlier) of dependent variable
(relationship marketing strategy) are related to each other. The
Factor Analysis-Factor analysis is a statistical tool used to null hypothesis being that, there is no statistically significant
group variables with similar characteristics together. It helps relationship between the sub variables of independent variables
to reduce large number of variables to a smaller number of and the sub variables of dependent variable.
manageable variables. The reduced number of factors is utilized
to explain the observed variance in the large number of variables. In the first instance the null hypothesis is that there is no
relationship between the sub variables of the independent
Correlation and Regression-The word “correlation” is used to variable trust and the sub variables of the dependent variable
denote the degree of association between the variables. In the relationship marketing strategy and the low p values (p<0.001)
current research the statistical tool has been used to find out obtained gave the strength to reject the same. In other words
the relationship between the individual independent variables we accept the alternative hypothesis that there is relationship
(Trust, Commitment) and the dependent variable (Relationship between the sub variables of the independent variable and the
Marketing Strategy) sub variables of the dependent variable.

In the second instance the null hypothesis is that there is no statistically significant relationship between the sub variables of the
independent variable commitment and the sub variables of the dependent variable relationship marketing strategy and the low p
values (p<0.001) obtained prove that the same can be rejected. In other words we accept the alternative hypothesis that there is
relationship between sub variables of the independent variable and the sub variables of the dependent variable.
Factor Analysis was then performed in three stages to reduce the number of variables into a manageable limit.
The tables showing the results are given below.
TABLE 1: Factor Analysis - Trust

KMO and Bartlett’s Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .758
Approx. Chi-Square 422.756
Bartlett’s Test of Sphericity Df 15
p value <0.001
Source: worked out by using the SPSS (version 20)using responses to questionnaire
The value of KMO measure of Sampling Adequacy as shown in the table above for the variable Trust is 0.758 which is acceptable,
hence Factor Analysis is appropriate for this data.
The Bartlett’s test of Sphericity tests the null hypothesis that original matrix is an identity matrix. The p-value for the variable Trust
is low enough (p<0.001) to reject the null hypothesis. In other words there are relationships between the variables.
TABLE 2: Total Variance explained:Trust
Total Variance Explained
Initial Eigenvalues Extraction Sums of Squared Loadings

Component
Total % of Variance Cumulative % Total % of Variance Cumulative %
1 2.717 45.285 45.285 2.717 45.285 45.285
2 .994 16.570 61.855
3 .761 12.683 74.538
4 .624 10.400 84.939
5 .532 8.867 93.806
6 .372 6.194 100.000

Extraction Method: Principal Component Analysis.
The above table shows the eigen values associated with each factor which represents the variance explained by that particular linear
component. SPSS was used to extract factors having eigen values more than 1 which left us with one component having actual eigen
value of 2.717 having variance explaining capacity of 45.285% which is satisfactory.
TABLE 3: Component Matrix:Trust
Component Matrixa
Component
1
TRUST : SECURITY OF TRANSACTION:The bank is very concerned with security for my transaction .769
TRUST : RELIABLE PROMISE : The bank’s promises are reliable .693

BANKING
TRUST : CONSISTENCY IN SERVICE : The bank is consistent in providing quality service .500
TRUST : RESPECT OF CUSTOMERS: The employees of the bank show respect to customers .753
TRUST : FULFILLS OBLIGATION : The bank fulfils it’s obligations to customers .621
TRUST : CONFIDENCE IN SERVICE : I have confidence in the bank’s services .666
Extraction Method : Principal Component Analysis.
a. 1 components extracted.
The Component matrix above shows factor loadings against component 1 extracted earlier. All the loadings are significant as the
values are more than 0.4. The order in which the customers considered the factors to be important is Security of transaction, Respect
of customers, Reliable Promise, Confidence in service, Fulfills Obligation and Consistency in service.
TABLE 4: Factor Analysis - Commitment


p value <0.001
The value of KMO measure of Sampling Adequacy as shown in the table above for the variable Commitment is 0.642 which is
acceptable, hence factor Analysis is appropriate for this data.
The Bartlett’s test of Sphericity tests the null hypothesis that original matrix is an identity matrix. The p-value for the variable
Commitment is highly significant (p<0.001) and low enough to reject the null hypothesis. In other words there are relationships
between the variables.
TABLE 5: Total variance explained : Commitment

Component
1 2.180 54.502 54.502 2.180 54.502 54.502
2 .793 19.815 74.317
3 .644 16.110 90.427
4 .383 9.573 100.000
The above table shows the eigen values associated with each factor which represents the variance explained by that particular
linear component. SPSS was used to extract factors having eigen values more than 1 which left us with one component having actual
eigen value of 2.180 having variance explaining capacity of 54.502 % which is satisfactory.

TABLE 6: Component Matrix : Commitment
Component Matrixa
Component

1
COMMITMENT : ADJUSTMENT : The bank makes adjustments to suit my needs .747
COMMITMENT : PERSONALISED SERVICES : The bank offers personalised services to meet customers’ needs .698
COMMITMENT : FLEXIBILITY1 : The bank is flexible when its services are changed .783
COMMITMENT : FLEXIBILITY2 : The bank is flexible in serving my needs .722
The Component matrix above shows factor loadings against component 1 extracted earlier. All the loadings are significant as
the values are more than 0.4. The order in which the customers considered the factors to be important is Flexibility1, Adjustment,
Flexibility2 and Personalised Services.
TABLE 7: Factor Analysis - Relationship Marketing Strategy

p value <0.001
Source: worked out by using the SPSS (version 20) based on responses to questionnaire
The value of KMO measure of Sampling Adequacy as shown in the table above for the variable Relationship Marketing Strategy
is 0.773 which is good hence factor Analysis is appropriate for this data.
The Bartlett’s test of Sphericity tests the null hypothesis that original matrix is an identity matrix. The p-value for the variable
Relationship Marketing Strategy is highly significant (p<0.001) and low enough to reject the null hypothesis. In other words there
are relationships between the variables.
TABLE 8: Total variance explained : Relationship Marketing Strategy

Component
1 2.393 47.869 47.869 2.393 47.869 47.869
2 .837 16.743 64.612
3 .697 13.944 78.555
4 .579 11.583 90.138
5 .493 9.862 100.000

Source: worked out by using the SPSS (version 20)based on responses to questionnaire

BANKING
The above table shows the eigen values associated with each factor which represents the variance explained by that particular
linear component. SPSS was used to extract factors having eigen values more than 1 which left us with one component having actual
eigen value of 2.393 having variance explaining capacity of 47.869% which is satisfactory.
TABLE 9: Component Matrix : Relation Marketing Strategy
Component Matrixa
Component

1
Relationship Marketing Strategy : SATISFACTION:I am satisfied with the overall relationship that I have with my bank .753
Relationship Marketing Strategy : PLEASANT EXPERIENCE:I have had a pleasant experience of working with my bank .539
Relationship Marketing Strategy :RELATIONSHIP BENEFITS:I receive benefits due to my relationship with bank .741
Relationship Marketing Strategy : BOND:I feel that I have a strong bond with my bank .680
Relationship Marketing Strategy : COOPERATION:I always receive cooperation from the bank due to my relationship with
.723
the bank
The Component matrix above shows factor loadings against component 1 extracted earlier. All the loadings are significant as the
values are more than 0.4. The order in which the customers considered the factors to be important is Satisfaction, Relationship
Benefits, Cooperation, Bond and Experience.
The table below represents the result of Correlations between independent variables and dependent variable. The outcome
(correlation and p value) reveals that the strength and significance of the relationship between individual Independent Variables
(Trust, Commitment) and the Dependent Variable (Relationship Marketing Strategy). In other words the independent variables have
a statistically significant relationship with the dependent variable individually as shown by the sig. value.
TABLE 10:Correlations between Independent and Dependent variables
Correlations
Relationship Marketing Strategy
Pearson Correlation 0.671
Trust
p value <0.001
Pearson Correlation 0.567
Commitment
p value <0.001
The researcher motivated by the above findings tried to find out the regression equation between the independent and the
dependent variable. The result of the Regression analysis is given below.
Table 11 Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 0.680a 0.462 0.459 0.73584490

a. Predictors: (Constant), Commitment, Trust
In the first table R2, also called the Coefficient of Determination measures the proportion of total variation of the Dependent
Variable (RMS) explained by the Independent Variables (Trust, and Commitment). In the current research the Independent Variables
explain 45.9% of the total variation of Dependent Variable which can be considered as satisfactory.
Table 12
ANOVAa
Model Sum of Squares Df Mean Square F Sig.
Regression 143.686 2 71.843 132.682 <0.001b
1 Residual 167.314 309 .541
Total 311.000 311
a. Dependent Variable: Relationship Marketing Strategy
b. Predictors: (Constant), Commitment, Trust

In this table the focus is on F-statistic. The tool tests the null hypothesis that none of the Independent Variables (Trust and
Commitment) help explain the variation in Dependent Variable (RMS). The p value (p<0.001) indicates that the F-statistic is large
enough to reject the null hypothesis and accept the alternative hypothesis that the Independent Variables (Trust and Commitment)
help explain the variation in Dependent Variable (RMS).
Table 13
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients

t Sig.
B Std. Error Beta
(Constant) -1.606E-17 .042 .000 1.000
1 Trust .554 .062 .554 8.987 <0.001
Commitment .159 .062 .159 2.588 0.010
a. Dependent Variable: Relationship Marketing Strategy
The aforementioned table helps us determine whether the Independent Variables (Trust and Commitment) together have a
statistically significant relationship with the Dependent Variable (RMS) and the direction and strength of the relationship.
It is found that the Independent Variables trust and commitment are positively correlated with the Dependent Variable Relationship

BANKING
Marketing Strategy. The regression equation is as follows  The sub-factors of commitment (i.e Adjustment, Personalised
services, Flexibility1, Flexibility 2) have significant influence
RMS= -1.606E-017 + 0.554 TRUST + 0.159 COMMITMENT on the sub-factors of Relationship Marketing Strategy (i.e
Satisfaction, Pleasant Experience, Relationship Benefits,
Further the following Hypothesis were tested Bond, Co-operation).
 The order of importance of the sub-factors of Trust, as per
Relationship between independent variables and dependent the customers of the selected banking branches of the
variable (RMS) Kolkata based banks are Security of Transaction, Respect
of customers, Reliable promise, Confidence service, Fulfills
Ho1: There is no relationship between perceived Trust and RMS in obligation, Consistency in Service.
the selected banking branches in Kolkata Metropolitan area  The order of importance of the sub-factors of Commitment,
as per the customers of the selected banking branches of the
Ha1: There exists a relationship between perceived Trust and RMS Kolkata based banks are Flexibility1, Adjustments, Flexibility2,
in selected banking branches in Kolkata Metropolitan area Personalised Services.
 The order of importance of the sub-factors of Relationship
In case of the relationship between Trust and Relationship Marketing Strategy ,as per the customers of the selected
Marketing Strategy the p value (p<0.001) indicates that the Ho1 banking branches of the Kolkata based banks are
is rejected. In other words alternative Hypothesis Ha1 that, there Satisfaction, Relationship Benefits, Co-operation, Bond,
exists a relationship between perceived Trust and RMS in selected Pleasant experience.
banking branches in Kolkata Metropolitan area is accepted.  The independent variables (i.e trust, commitment,) have
strong individual correlation with the dependent variable
Ho2: There is no relationship between perceived Commitment and Relationship Marketing Strategy.
RMS in selected banking branches in Kolkata Metropolitan  The independent variables (i.e trust, commitment) individually
area help explain significant amount of variance of dependent
variable Relationship Marketing Strategy.
Ha2: There exists a relationship between perceived Commitment
and RMS in selected banking branches in Kolkata Metropolitan Suggestions
area
The researcher offers the following suggestions based on the
In case of the relationship between Commitment and empirical research carried out on the responses of the customers
Relationship Marketing Strategy the p value (p<0.05) indicates of selected banking branches of United Commercial Bank, United
that the Original Hypothesis Ho2 is rejected. In other words the Bank of India and Allahabad Bank:
Alternative Hypothesis (Ha2) that there is relationship between Banks may concentrate more on trust while designing
perceived Commitment and RMS in selected banking branches in Relationship Marketing Strategies.
Kolkata Metropolitan area is accepted. Banks wishing to retain customers by developing trust may
focus on factors like security of transaction, respect of customers,
Concluding Observations reliable promise, confidence, fulfills obligation, and consistency
in service respectively.
The analysis of the empirical research carried out on the Banks wishing to retain customers by developing commitment
responses of the customers of selected banking branches of may focus on flexibility, adjustment and personalized services
United Commercial Bank, United Bank of India and Allahabad respectively.
Bank has helped the researcher draw the following conclusions:
References
 The sub-factors of trust (i.e Security of Transaction, Reliable
Promise, Consistent Service, Respect of Customers, Fulfills 1. Amine, A. (1998). Consumers’ true brand loyalty:
Obligation, Confidence in Service) have significant influence the central role of commitment. Journal of Strategic
on the sub-factors of Relationship Marketing Strategy (i.e Marketing, 6(4), pp. 305-19.
Satisfaction, Pleasant Experience, Relationship Benefits, 2. Bagozzi, Richard P. (1975). “Marketing as Exchange”.
Bond, Co-operation). Journal of Marketing, Volume 39, Issue 4 (October),
32-39.
3. Berry, Leonard L., (1980) ―Services Marketing is Different,

Business, Vol. 30(May-June), pp. 24-29. Chicago, Volume 24, Number 2 (April), 96-113.
4. Berry, L. (1983) “Relationship Marketing” in Berry, 16. McGarry, Edmund D. (1953). “Some new viewpoints in
Shostack, and Upah, G (eds), Emerging Perspectives on marketing”. The Journal of Marketing, Volume 18, Issue
Services Marketing, American Marketing Association, 1 (July), 33-40.
Chicago, 1983. 17. Moorman, Christine, Deshpande, R. and Zaltman, G.
5. Bowen, J.T and Shoemaker, S (1998). Loyalty: a (1992). ‘Relationship between providers and users of
strategic commitment. The Cornell Hotel and Restaurant market research : the dynamics of trust within and
Administration Quarterly, 44(5), pp. 31-47. between organisations’. Journal of Marketing Research,
6. Dwyer, Robert, F., Paul, H. S, and Sejo, O. (1987), 29(3), pp. 314-28.
Developing buyer seller relationship, Journal of Marketing, 18. Moorman, C., Deshpande´, R. and Zaltman, G. (1993),
51 April, 11-27. Relationship between Providers and Users of Market
7. Grönroos, C. (1978), ―A Service Oriented Approach to Research: The Role of Personal Trust, Marketing Science
Marketing of Services, European Journal of Marketing, Institute, Cambridge, MA.
Vol. 12(8), pp 588-601. 19. Morgan, R.M. and Hunt, S.D. (1994), “The commitment
8. Grönroos, C. (1982) “An applied service marketing trust theory of relationship marketing”, Journal of
theory”, European Journal of Marketing, vol 16, 1982, pp Marketing, Vol. 58 No. 3, pp. 20-38.
30–41. 20. Mowday, R., Porter, L. and Steers, R. (1982),
9. Grönroos, C., “The Marketing Strategy Continuum: A “Organizational linkages: the psychology of commitment”,
Marketing Concept for the 1990s”, Management Decision, Journal of Vocational Behavior, Vol. 14, pp. 224-47.
Vol. 29 No. 1, 1991, pp. 7-13. 21. Ndubisi, N.O. (2004), “Understanding the salience
10. Grönroos, C. (1994), “From Marketing Mix to Relationship of cultural dimensions on relationship marketing,
Marketing: Towards a Paradigm Shift in Marketing”, its underpinnings and aftermaths”, Cross Cultural
Management Decision, Vol. 32 No. 2, pp. 4-20. Management, Vol. 11 No. 3, pp. 70-89.
11. Gundlach, G.T., Achrol, R.S. and Mentzer, J.T. (1995), 22. Schneider, B. (1980) “The service organization climate is
“The structure of commitment in exchange”, Journal of critical”, Organizational Dynamics, 1980.
Marketing, Vol. 59 No. 1, pp. 78-93. 23. Sheith, J. N., Gardner, D. and Garrett. D., (1988),
12. Howard, J.A. and Sheth, J.N. (1969), The Theory of Buyer Marketing Theory: Evolution and Evaluation, New York
Behavior, Wiley, New York, NY. John Wiley, New York ,54.
13. Jackson, B.B. (1985) “Build customer relationships that
last”, Harvard Business Review, Nov-Dec, 1985. [email protected]
14. Levitt, T. (1983) “After the sale is over”, Harvard Business
Review, Sept-Oct, 1983.
15. McGarry, Edmund D. (1951). “The Contactual Function in
Marketing”. The Journal of Business of the University of
Clarification on the notification issued dated 21st September 2016 for CEP Credit
Hours requirements for the block of three (3) years starting effective April 1,
2015 to March 31, 2018, to be complied with by Members holding Certificate
of Practice above the age of 65 years which states that -
“The member should undergo minimum mandatory training of 50% of the

minimum CEP hours per year and block of 3 years as per the category of the
members holding Certificate of Practice below the age of 65 years, i.e. 7 hours
per year and 25 hours in a block of 3 years.”
Clarification : The above requirements shall be effective for renewal of CoP from FY
2018-19 onwards and will not be applicable for renewal of CoP for FY 2017-18.

TAX UPDATES
Customs  Appointment of Common Adjudication Authority in the case
of M/s International Aircon Pvt. Ltd.
Notifications: [Notification No. 20/2017-Cus (NT),dt. 03-03-2017]
Tariff:  Amendment of Notification No. 384/86-Cus (N.T) dated

23.07.1986
 Amendment to Notification No.09/2012-Cus reg. enabling
authorised offices or agencies in India of the laboratories [Notification No. 19/2017-Cus (NT),dt. 03-03-2017]
mentioned under para 4.74 of HBP 2015-20  Amendment of Notification No. 31/97-Cus (N.T) dated
[Notification No. 07/2017-Cus,dt. 01-03-2017] 07.07.1997
 Seeks to further amend Notification No. 12/2012-Customs, [Notification No. 18/2017-Cus (NT),dt. 03-03-2017]
dated the 17.3.2012 so as to carry out Budgetary changes.  Appointment of Common Adjudication Authority in the case
Details are contained in Joint Secretary (TRU – I) DO letter dated of M/s Fulchand & Sons
31.1.2017.
[Notification No. 17/2017-Cus (NT),dt. 03-03-2017]
[Notification No. 06/2017-Cus,dt. 02-02-2017]
 Courier Imports and Exports (Clearance) Amendment
 Seeks to reduce Basic Customs Duty from 10/7.5 % to 5% Regulations, 2017
on all items of machinery required for (a) initial setting up of fuel
cell based system for generation of power or for demonstration [Notification No. 16/2017-Cus (NT),dt. 03-03-2017]
purposes and (b) for balance of systems operating on biogas or  Amendment to Notification No.62/1994-Customs (N.T.)
bio-methane or by-product hydrogen. dated 21st November, 1994 in respect of Revdanda Port in State
[Notification No. 05/2017-Cus,dt. 02-02-2017] of Maharashtra for the purpose of unloading of imported goods
and loading of export goods or any class of such goods
 Seeks to further amend Notification No. 21/2012-Customs,
dated the 17.03.2012 so as to specify the rate of additional duty [Notification No. 15/2017-Cus (NT),dt. 02-03-2017]
of customs leviable under sub-section 3(5) of Customs Tariff Act,  Rate of exchange of conversion of the foreign currency with
1975 for items specified therein. effect from 3rd March, 2017
[Notification No. 04/2017-Cus,dt. 02-02-2017] [Notification No. 14/2017-Cus (NT),dt. 02-03-2017]
 Seeks to further amend Notification No. 27/2011-Customs  Tariff Notification in respect of Fixation of Tariff Value of
dated 1.3.2011. Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver
[Notification No. 03/2017-Cus,dt. 02-02-2017] – Reg
 Notification No. 02/2017-Customs dated 27.01.2017 seeks [Notification No. 13/2017-Cus (NT),dt. 28-02-2017]
to further amend Notification No. 96/2008-Customs dated  Rate of exchange of conversion of the foreign currency with
13.08.2008 so as to prescribe a Margin of Preference of 60% for effect from 17th February, 2017
all goods falling under sub-heading [0802 80] under the Duty
Free Tariff Preference (DFTP) scheme. [Notification No. 12/2017-Cus (NT),dt. 16-02-2017]
[Notification No. 02/2017-Cus,dt. 27-01-2017]  Tariff value Notification in respect of Fixation of tariff Value
of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and
 seeks to further amend Notification no.153/93- Customs, Sliver
dated 13th August, 1993
[Notification No. 01/2017-Cus,dt. 20-01-2017]
 Empowering the Principal Commissioner with the powers of
Non-Tariff: Chief Commissioner
 Rate of exchange of conversion of the foreign currency with [Notification No. 10/2017-Cus (NT),dt. 08-02-2017]
effect from 17th March, 2017
 Rate of exchange of conversion of the foreign currency with
[Notification No. 22/2017-Cus (NT),dt. 16-03-2017] effect from 3rd February, 2017
 Tariff Notification in respect of Fixation of Tariff Value of [Notification No. 09/2017-Cus (NT),dt. 02-02-2017
Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver-
 The Director General, Revenue Intelligence, hereby appoints
Reg.
officers mentioned in column (5) of the Table below to act as
[Notification No. 21/2017-Cus (NT),dt. 15-03-2017] a common adjudicating authority to exercise the powers and
discharge the duties conferred or imposed on officers mentioned

in column (4) of the said Table in respect of notices mentioned on Hot Rolled products of alloy or non-alloy steel originating in
in column (2) of the said Table for the purpose of adjudication of or exported from China PR, Japan, Korea RP, Russia, Brazil and
show cause notices mentioned in column (3) of the Table Indonesia, vide notification No. 44/2016-Customs (ADD), dated
the 08.08.2016, for a further period of two months.
[Notification No. 05/2017-Cus (CAA/DRI),dt. 31-01-2017]
[Notification No. 05/2017-Cus (ADD), dt. 07-02-2017]
 Tariff value Notification in respect of Fixation of tariff Value
of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and
Sliver
Central Excise
 The Director General, Revenue Intelligence, hereby appoints
Notifications:
officers mentioned in column (5) of the Table below to act as Tariff:
a common adjudicating authority to exercise the powers and
discharge the duties conferred or imposed on officers mentioned  Seeks to amend Notification No. 16/2010-Central Excise
in column (4) of the said Table in respect of noticees mentioned dated 27.2.2010 so as to carry out Budgetary changes.
in column (2) of the said Table for the purpose of adjudication
[Notification No. 07/2017-CE, dt. 02-02-2017
of show cause notices mentioned in column (3) of the said Table
 Seeks to amend Notification No. 12/2012-Central Excise
[Notification No. 04/2017-Cus (CAA/DRI),dt. 30-01-2017]
dated 17.03.2012 so as to carry out Budgetary changes.
 Seeks to notify the India-Japan Comprehensive Economic
[Notification No. 06/2017-CE, dt. 02-02-2017]
Partnership Agreement (Bilateral Safeguard Measures) Rules,
2017  Seeks to prescribe 6% concessional excise/CV duty on
all items of machinery required for (a) initial setting up of fuel
cell based system for generation of power or for demonstration
 Regarding grant of Presidential Award of Appreciation purposes and (b) for balance of systems operating on biogas or
Certificate to the officers of the Customs & Central Excise on the bio-methane or by-product hydrogen.
eve of Republic Day, 2017
 Seeks to further amend Notification No. 42/2008-Central
Excise dated 1.7.2008 so as to carry out Budgetary changes.
Anti Dumping Duty:
 Seeks to order provisional assessment on imports of
“Phosphoric Acid-Technical Grade and Food Grade (including  Seeks to further amend Notification No. 6/2005-Central
Industrial Grade)”, originating in or exported from People’s Excise dated 1.3.2005 so as to carry out Budgetary changes.
Republic of China by M/s. Guangxi Quinzhou Capital Success
Chemical Co. Ltd. (producer or exporter) into India till the [Notification No. 03/2017-CE, dt. 02-02-2017]
finalization of New Shipper Review initiated by DGAD, vide
notification No.15/5/2016 - DGAD, dated 09.02.2017
Non Tariff:
 Amendment to Notification No 38/2001-Central Excise
(N.T.), dated the 26th June, 2001, regarding jurisdiction
 Seeks to levy definitive anti-dumping duty on Seamless
[Notification No. 06/2017-CENT dt. 14-03-2017 ]
tubes, pipes and hollow profiles of iron, alloy or non-alloysteel
(other than cast iron and stainless steel), whether hot finished  Seeks to further amend Central Excise Rules, 2002
or cold drawn or cold rolled of an external diameter not
[Notification No. 05/2017-CENT dt. 02-02-2017]
exceeding355.6 mm or 14” OD originating in,or exported from the
People’s Republic of China.  Seeks to further amend CENVAT Credit Rules, 2004
[Notification No. 07/2017-Cus (ADD), dt. 17-02-2017] [Notification No. 04/2017-CENT dt. 02-02-2017]
 Seeks to extend the levy of anti-dumping duty, imposed on  Seeks to amend Notification No. 11/2010-Central Excise
Cold Rolled Flat Products of alloy or non-alloy steel originating (N.T) dated 27.2.2010.
in or exported from China PR, Japan, Korea RP and Ukraine vide
notification No. 45/2016-Customs (ADD), dated the 17.08.2016,
for a further period of two months.  Seeks to amend Notification No. 30/2008-Central Excise
dated 1.7.2008.
 Seeks to extend the levy of anti-dumping duty, imposed

TA X U P D AT E S
Service Tax  The Central Government hereby notifies for the purposes
for the said clause, Assam Electricity Regulatory Commission,
constituted by the Government of Assam, in respect of the
 Seeks to amend Notification No 25/2012-Service Tax, dated following specified income arising to that Commission, namely:-
20.6.2012.
amount received in the form of government grants;
[Notification No. 10/2017-Service Tax dt. 08-03-2017]
amount received as license fees, petition fees and fines; and
 Service Tax payable by way of admission to a museum
interest earned on government grants, license fees, petition
[Notification No. 09/2017-Service Tax dt. 28-02-2017] fees and fines kept as deposits or fixed deposits with banks.
 Services by the operators of Common Effluent Treatment [Notification No. 14/2017/F. No. 196/30/2016-ITA-I]
Plant by way of treatment of effluent from the 1st of July 2012 to
31st of March 2015  The Central Government, hereby notifies for the purposes of
the said clause, the National Iranian Oil Company, as the foreign
[Notification No. 08/2017-Service Tax dt. 20-02-2017] company and the Memorandum of Understanding entered
 Seeks to amend notification No. 25/2012-Service Tax, dated between the Government of India in the Ministry of Petroleum
20th June 2012, so as to amend certain existing entries granting and Natural Gas and the Central Bank of Iran on the 20th day of
exemption on specified services and inserting new entries for January, 2013 as modified by the minutes of meeting signed on
granting exemption from service tax on specified services. the 16th August, 2016 between the Government of India, Ministry
of Finance, Department of Economic Affairs and Bank Markazi
[Notification No. 07/2017-Service Tax dt. 02-02-2017] Jomhouri Islami Iran, as the agreement subject to the condition
 Seeks to amend Service Tax Rules, 1994 so that in case of that the said foreign company shall not engage in any activity
online information and database access or retrieval services in India, other than the receipt of income under the agreement
provided or agreed to be provided by any person located in a non- aforesaid.
taxable territory and received by non-assesse online recipient, the 2. This notification shall be deemed to have come into force
service tax payable for the month of December, 2016 and January, from the 16th day of August, 2016.
2017, shall be paid to the credit of the Central Government by the
6th day of March, 2017. [Notification No. 13/2017/ F. No. 370142/2/2017-TPL]
[Notification No. 06/2017-Service Tax dt. 30-01-2017]  Whereas, a Protocol amending the Convention and the
Protocol between the Republic of India and the State of Israel
 Seeks to amend notification No. 25/2012-ST dated for the avoidance of double taxation and for the prevention of
20.06.2012 so as to withdraw the exemption from service tax fiscal evasion with respect to taxes on income and on capital
for online information and database access or retrieval services was signed at Jerusalem, Israel on the 14th day of October, 2015
provided by a person located in non-taxable territory to an entity (hereinafter referred to as the said Protocol);
in India registered under section 12AA of the Income Tax Act, 1961
(43 of 1961). And whereas, the said Protocol has entered into force on the
19th day of December, 2016, being the date of the last notification
[Notification No. 05/2017-Service Tax dt. 30-01-2017] of the completion of the procedures as required by the respective
laws for entry into force of the said Protocol, in accordance with
Article 6 of the said Protocol.
Income Tax [Notification No.10/2017 F. No. 500/14/2004-FTD-II]

 The Central Board of Direct Taxes hereby makes the following
rules further to amend the Income-tax Rules, 1962, namely:-
Notification:
(1) These rules may be called the Income –tax (2 nd Amendment)
 The Central Government in exercise of The powers conferred Rules, 2017.
by clause (iii) of subsection (4) of Section 80-IA of the Income-
tax Act, 1961(43 of 1961)(hereinafter referred to as the said (2) They shall come into force on the date of their publication
Act), has framed and notified a scheme for industrial park, by in the Official Gazette.
the notifications of the Government of India in the Ministry of
In the Income-tax Rules, 1962, –
Commerce and Industry (Department of Industrial Policy and
Promotion) vide number S.O. 354(E), dated the 1st day of April, in rule 114, in sub-rule (1) for the proviso the following proviso
2002, for the period beginning on the 1st day of April, 1997 and shall be substituted, namely:- “Provided that an applicant may
ending on the 31st day of March, 2006; apply for allotment of permanent account number through a
common application form notified by the Central Government in
[Notification No. 15 /2017, F.No.178/7/2016-ITA-I]
the Official Gazette, and the Principal Director General of Income-

tax (Systems) or Director General of Income-tax (Systems) shall  The Central Government hereby notifies for the purposes
specify the classes of persons, forms and formats along with for the said clause, the Punjab State Electricity Regulatory
procedure for safe and secure transmission of such forms and Commission, constituted by the Government of Punjab, in respect
formats in relation to furnishing of permanent account number.” of the following specified income arising to that Commission,
namely:-
in rule 114A, in sub-rule (1) for the proviso the following proviso
shall be substituted, namely:- “Provided that an applicant may amount received in the form of processing fee for determination
apply for allotment of a tax deduction and collection account of tariff;
number through a common application form notified by the
amount received in the form of licence fee;
Central Government in the Official Gazette, and the Principal
Director General of Income-tax (Systems) or Director General amount received in the form of petition fee; and
of Income-tax(Systems) shall specify the classes of persons,
amount of interest income earned on bank deposits.
applicable forms and formats along with procedure for safe and
secure transmission of such forms and formats in relation to 2. This notification shall be effective subject to the conditions
furnishing of tax deduction and collection account number.”. that Punjab State Electricity Regulatory Commission,-
[Notification No. 9/2017/F.No. 370142/40/2016-TPL] shall not engage in any commercial activity;
 The Central Government hereby notifies for the purposes for activities and the nature of the specified income remain
the said clause, Punjab Building & Other Construction Workers unchanged throughout the financial years; and
Welfare Board, constituted by the Government of Punjab, in
respect of the following specified income arising to that Board, shall file returns of income in accordance with the provision
namely:— of clause (g) of sub-section (4C) section 139 of the Income-tax
Act, 1961.
 labour cess collection; and
 interest income on deposits. 3. This notification shall be applicable for the financial years
 This notification shall be effective subject to the conditions 2016-17 to 2020-21.
that Punjab Building & Other Construction Workers Welfare [Notification No. 5 /2017/F. No. 300196/3/2016-ITA-I]
Board,-
 The Central Government hereby specifies the NCDEX
shall not engage in any commercial activity; Investor (Client) Protection Fund Trust (PAN: AABTN7481R)
activities and the nature of the specified income remain set up by the National Commodity and Derivatives Exchange
unchanged throughout the financial years; and Limited, Mumbai a commodity exchange, for the purposes of
the said clause for the assessment year 2013-14 and subsequent
shall file returns of income in accordance with the provision assessment years.
of clause (g) of sub-section (4C) section 139 of the Income-tax
Act, 1961. [Notification No. 4 /2017/F.No. 173/51/2013-ITA-I]
 This notification shall be applicable for the financial year Contributed by

2016-17 to 2020-21.
Taxation Committee
[Notification No. 6/2017/F. No. 300196/20/2016-ITA-I]
Institute of Cost Accountants of India
Ref. No.: CMA (3)/2017 March 31, 2017

NOTICE
Extension of time for CEP Credit Hours for renewal of Certificate of Practice (COP)
Dear Members,
As you are aware that in case of members holding Certificate of Practice (COP), as per the Guidelines for Mandatory Training for
all Members of The Institute under Continuing Education Programme, it is mandatory to undergo minimum mandatory training
of 15 hours per year commencing from 1st April to 31st March. If the COP of members is not renewed for the year 2017-18 owing
to shortfall in CEP hours, it might cause hardship to those members who thrive exclusively on practice notwithstanding the fact
that compliance of prescribed minimum requirement of CEP hours is mandatory for renewal of Certificate of Practice. In view
of the above, it is decided by the Council of the Institute to grant an extension upto 15th May, 2017 to complete the requirement
of CEP credit hours for renewal of COP of the members for the year 2017-18.
(Kaushik Banerjee)
Secretary

INSTITUTE NEWS
Eastern India Regional Council
On January 21 and 22, 2017, EIRC arranged a two day workshop
on IBC-2016 for aspirant professionals appearing In Limited
Mehta, Manager, Indirect Tax Deloitte were the eminent speakers

present during the workshop. CMA Biswarup Basu, Council
Member, CMA Bibekananda Mukhopadhyay, Chairman EIRC,
CMA Pranab Kr. Chakraborty, Vice Chairman, EIRC, CMA Shiba
Insolvency Examination. The workshop had been conducted by Prasad Padhi, immediate past chairman, EIRC, CMA Shyamal Kr
CMA Sumit Binani. On February 6, 2017 EIRC arranged a Panel Bhattacharjee, RCM, EIRC, CMA (Dr.) Umar Farooque, RCM, EIRC
Discussion on Union Budget 2017-18. eminent speakers, Shri K.L. & CMA Arundhati Basu Chairperson, PD & Seminar Committee,
EIRC were among other distinguished delegates present in this
programme.
The Institute of Cost Accountants of India-Bhubaneswar

Chapter
The Chapter organized one Practitioners Meet on ‘Insolvency

& Bankruptcy Code-2016 – opportunities & challenges for CMAs’
on March 5, 2017 at its premises. CMA Bibhuti Bhusan Nayak,
Chairman, PD Committee of the Chapter delivered the key note
Maheshwari, Chief Commissioner, Income Tax, GOI, Prof. P.K Roy,
Shri. N.P Jain, Shri Kalyan Kar, CMA Mrityunjay Acharjee, Associate
Vice President, Balmer Lawrie, Dr. Suman Mukherjee, renowned
Economist, Shri S.K Sanyal were among the distinguished
panelists present in the discussion meet. On 7th February 2017,
EIRC participated in the programme organised by NCLT Kolkata
Bar Council Association. CMA Bibekananda Mukhopadhyay,
Chairman, EIRC, CMA Pranab Kr. Chakraborty, Vice Chairman, address. CMA Shyam Sundar Sonthalia, Past Chairman, EIRC was
EIRC, CMA Arundhati Basu, Chairperson, PD Committee, EIRC & the resource person of the programme and deliberated in details
CMA Shyamal Kr. Bhattacharjee, RCM, Shri Prabir Banerjee, PD & on the topic to the participants. On March 8, 2017 the chapter
education officer along with other members of Institute attended observed Women’s Day at its premises and in this connection,
the programme to felicitate Shri M.M Kumar, President of NCLT. On
February 18 and 19, 2017 the Region organized a two day workshop
on GST. CMA Ashok B Nawal, CCM & Chairman Taxation Committee
of the Institute, CMA Suraj Prakesh, GM (Finance), BHEL & CA Vivek
plantation of flower plants was made in the chapter’s premises by

girl students of the Chapter in the presence of CMA Siba Prasad
Kar, Chairman of the chapter, CMA Basanta Kumar Pattnaik, past
chairman and one of the founder members of the chapter.

The Institute of Cost Accountants of India-South Odisha problems being faced by the industry regarding GST registrations.
Chapter
The association expressed its desire to conduct more sessions in
An Evening Talk programme had been conducted by the Chapter

on January 18, 2017 on ‘Maintenances of Cost Records and Cost
Audit under Companies Act – 2013’ and CMA S. S. Sonthalia, Chief
near future with NIRC. It was also proposed to set up two days
camps by NIRC for GST queries as and when required in their office.
Guest and the chief speaker spoke on salient features of companies

cost records and audit records. CMA B. B. Nayak, Chairman of the
chapter provided a brief introduction about cost records and cost
audit under Companies Act 2013 to the audience. On February
15, 2017 an Evening Talk programme had been conducted by the
chapter on ‘Union Budget – 2017 an over view’ and CMA Siba Prasad
Padhi, member, EIRC, the chief speaker focused on developments of
infrastructure in budget. He also discussed about budget allotment
on digital economy and public services, fiscal management. CMA
Akshya Kumar Swain, lecturer in Khallikote Cluster University
On January 14, 2017 the Region organized an in-house seminar at
Bharat Electronics Ltd, Sahibabad on ‘Overview of GST and Impact
on BEL Ltd’ along with procedural issues. CMA S.K, Bhatt, RCM,
NIRC and CMA Sandeep Goel and CMA Deepika B. Prasad, member
of the Institute were the keynote speakers of the seminar. On
January 19, 2017 the Region organized another inhouse seminar on
GST Overview and Compliance issue with Badli Industrial Estate
Association (Regd.), Delhi presented by CMA S.K Bhatt, RCM, NIRC
and CMA Sandeep Goel and CMA Deepika B. Prasad, member of the
Institute. On February 2, 2017, NIRC organised an inhouse seminar
as speaker spoke about Budget – 2017. CMA Biranchi Narayan
Mallick, CFO, South Co Utility, the chief guest and CMA Ch. Venkata
Ramana, treasurer, EIRC as guest of honour reviewed points on
Budget.
Northern India Regional Council

The Region started awareness campaign on GST among the
Industries/Traders associations. On January 6, 2017 the first
programme was conducted by NIRC in association with Mayapuri
Industrial Welfare Association on GST Registrations and GST
Returns. The program was conducted by Regional Council Members, on GST with impact on marketing perceptive by NIRC at Bharat
CMA Navneet Kumar Jain and CMA Sanjay Garg. Mr Neeraj Sehgal, Electronics Ltd at their Connaught place office for their marketing
General Secretary from the association also spoke about the team. On February 4, 2017, an inhouse seminar had been organized

INSTITUTE NEWS
by NIRC on GST at Gurgaon office of Power Grid Corporation of course is jointly run by the Institute and RSLDC. Chief Guest, Shri
India Ltd deliberated by CMA Sandeep Goel and impact analysis Sunil Soni said that specialty of this course is that it offers practical
was delivered by CMA Anil Sharma and CMA Rakesh Bhalla. The knowledge of Tax Return Filling Computer, Tally Accounting and also
session was chaired by CMA K. Sreekant, Director Finance of Power emphasises on soft skills. CMA I. Ashok, Chairman, CAT Course and
council member advised the students to complete the course with
Grid Corporation and attended by various General Managers and

other senior officials. On February 10, 2017 the Region in association
with NTPC, Dadri conducted a half day programme on GST. The sincerity and dedication. On this occasion Shri Naveen Sharma,
key note speakers on this occasion were Mr. Ravi Sahni, Chairman, DGM, RSLDC, CMA P.R. Jat, Chairman, CMA Alok Kumar Gupta,
NIRC, Mr. Anil Sharma, Secretary, Mr. S K Bhatt, RCM & Mr. R K secretary and CMA R.K. Bhandari, executive member of the chapter
Bhalla, Past Chairman, NIRC who shared all the nitty-gritty about and CMA R.K. Jain, Asstt. Director, CAT was also present. The
the proposed act and how to gear up for the future requirement. Chapter organized a seminar on ‘GST’ and ‘Insolvency & Bankruptcy
Participants from Finance and Contract & Material(C&M) along Code 2016’ on February 25, 2017 at its premises. In his inaugural
with Head of Finance, Mr. Masood Ansari and Head of C&M, Mr.
U S Gupta attended the programme and the entire programme was
successfully coordinated by CMA K N Thakur, DGM, Finance, NTPC address, CMA Ravi Kumar Sahni, chairman, NIRC told if the Govt.
Dadri. On March 4, 2017 the seminar had been jointly organized by brings out mandatory provisions for Cost Control, it will benefit to
UCCI Udaipur and NIRC on handling IT Notices post demonetization the consumers as well as increase revenue of the Govt. and enhance
at the premises of Udaipur Chamber of Commerce & Industry, GDP growth. Key Speaker of first technical session was CMA Anil
Udaipur. CMA Ravi Kumar Sahni, Chairman, NIRC, was the chief
guest and he told that GST is destination based tax and will be
levied on supply , not on sales. CMA Navneet Kumar Jain, RCM,
NIRC shared that objective of these notices is to find the source
of cash deposit so the black money earned can be legalized. UCCI
President Shri V.P. Rathi, Sr. Vice President Shri Hansraj Choudhary,
Hon Gen. Secretary Shri Jatin Nagori and other office bearers were
present in the seminar.
The Institute of Cost Accountants of India -Jaipur Chapter

Kumar Sharma, Secretary, NIRC and he explained in detail about
On February 18, 2017 the first batch of CAT classes was various practical aspects of GST. Second technical session was on
inaugurated by Shri Sunil Soni, Chief Accounts Officer of Rajasthan ‘Insolvency and Bankruptcy Code 2016’. Key Speaker was CMA Ravi
Skill & Livelihood Development Corporation (RSLDC) and this Kumar Sahni, Chairman, NIRC and he explained legal provisions of

Insolvency and Bankruptcy Code 2016 in terms of Bankrupt entity, subjects. On December 21, 2016 a seminar was held on ‘Goods and
Adjudicating and Appellate Authorities and the functions and Service Tax’ and Shri Ritvik Pandey, IAS, Sri D.P. Nagendra Kumar,
duties of insolvency professionals.
Southern India Regional Council

The Institute of Cost Accountants of India-Bangalore Chapter
A Practitioners’ Forum Meet was held on January 27, 2017

on ‘Cost Audit – Way Forward’ at Chapter’s premises and
CMA Suryanarayana , SIRC member, CMA Zitendra Rao, SIRC
Member, CMA M R Kishna Murthy were present at the Meet.
Various professional development meets on ‘De-Monetisation, IRS, Dr. Ravi Prasad, Joint Commissioner of Commercial Taxes, CMA
Re-Monetisation and E-Monetisation’, ‘Latest Development B M Sharma were present at the seminar. Another seminar was
in Financial Systems in India’, ‘Insolvency & Bankruptcy code held on January 18 and 28, 2017 at MLA College, Bangalore on the
2016-Impact & opportunities for CMAS’ etc were organized by
same theme. Various career counselling programmes were held on

the chapter at its premises on December 2016 and January 2017 different dates of December 2016 and January 2017 at different
and many eminent dignitaries shared their views on the concerned colleges of Bangalore.
The Institute of Cost Accountants of India-Coimbatore

Chapter
The Chapter organized a joint PD program on ‘Budget 2017’

on February 4, 2017 with Coimbatore branch of the Institute of
Chartered Accountants of India and Auditors’ Association of
Southern India. The budget proposals on direct and indirect
taxes were discussed in length. As per HQ Circular, Cost Synergy
Week was celebrated from 1st to 7th February, 2017. CMA K.

INSTITUTE NEWS
Anantharaman, Management Consultant, Coimbatore addressed Associates, CA Naveen Agarwal, Partner, TAX & Regulatory
MBA students at Avinashilingam University on February 3, 2017. Services, Ernst & Young India and CA Sidhartha Jain, Partner,
CMA R. Maheswaran, Vice President, Finance & Infrastructure,
Coimbatore Hitech Infrastructure Pvt. Ltd. (Special Economic Zone-
ITES), KG Information Systems Private Limited, KGISL Technologies
Indirect Taxation, Ernst & Young India were the speakers of the
programme. They with powerpoint presentations explained the
key changes proposed by Honourable Finance Minister from
and Infrastructures Private Ltd, Coimbatore addressed oral 01st March, 2017. On February 6, 2017 a student orientation
coaching students on February 6, 2017. On February 5, 2017 the programme was held at CMA Bhawan and CMA D. Surya Prakasam,
Chairman, CMA Dr R. Chandra Sekhar, Secretary & CMA K.V.N.
Lavanya, Vice Chairperson, CMA D. Zitendra Rao, Member,
SIRC attended the programme. On February 18, 2017 a half day
chapter conducted communication and soft skill programme for

intermediate students. On February 18, 2017 the chapter organized
an industrial visit for the students to M/s. Precot Meridian Cotton seminar had been organized by the chapter on ‘Implementation
Spinning Mills Ltd., Kanjikode Palakkad. of IND-AS’ at FTAPCCI Auditorium, FTAPCCI Bhavan, Hyderabad.
CMA V.V. Ravi Kumar, EFO, Laurus Labs Ltd. was the chief guest
and had rightly emphasized the need for India to follow IFRS. Sri
The Institute of Cost Accountants of India-Hyderabad Chapter Naga Durga Sudhakar, Associate Director Finance, Dr. Reddy’s
Laboratories Ltd was the speaker of the seminar. On the same day,
a training programme on ‘GST and its impact on Electricity Sector’
On February 2, 2017 a programme was conducted by the for Telangana Electricity Accounts Staff Association (TEASA) was
chapter on ‘Analysis of Union Budget, 2017’ at ICSI-Hyderabad held at TSSPDCL, Corporate Office, Hyderabad and CA Manindar,
Chapter Premises, Hyderabad. CA VS. Sudhir, Partner, Hiregange & Practising Chartered Accountant and Sri J.V Rao, Advocate & Tax
Consultant were the speakers of the programme. CA Maninder

gave a quick overview of the model GST law and the key differences be known by the investors before investing in mutual funds and
between the current indirect tax regime and GST regime. Sri J.V
Rao explained the background of GST and had made the session other securities.
interactive by taking questions from the participants. On February On March 8, 2017 the Chapter celebrated International Women's
19 and 25, 2017 a programme on ‘Concurrent Audit in Banks’ had Day on ‘Global Corporate Trends - Women Leadership’ in association
been held at CMA Bhavan and Sri K. Radhakrishnan, Deputy General with ICSI-Hyderabad Chapter, Institute of Directors and Institute of
Manager, Circle Office, Canara Bank, the chief guest highlighted Public Enterprise at IPE, Osmania University. CMA Manas Kumar
Thakur, President of the Institute was the chief guest and CS Sheela,
CS Rasheeda, CMA Manjula and Smt. Vinulata were the speakers
of the programme. The speakers highlighted their points as to why
there is dearth of women in leadership roles despite more number
of women joining the middle management roles. On the same day a
Press Meet was occurred at NKM's Grand, Erramanzil, Hyderabad.
President of the Institute, CMA Manas Kumar Thakur detailed the
need of CMAs to the society and how students will be benefitted by
taking up the course. On March 9, 2017 a programme was held on
‘Women as Entrepreneurs and Directors’ and Deputy Commissioner
that Cost and Management Accountants shall advise the banks of Police, North Zone, Smt. B. Sumathi was the chief guest and
to arrest increasing NPAs(non performing assets). Speaker CMA Smt K. Ramadevi, President of ALEAP and Smt Sujana Prabha,
K.S.N. Murthy, Practising Cost Accountant explained in detail the Vice-President of Vivekananda Seva Samithi of the Bharat Vikas
approach for conducting concurrent audit in banks. On February 27 Parishad, Hyderabad Chapter were among the eminent dignitaries
and 28, 2017 a joint programme with Dept of Commerce, Osmania present during the programme. Smt K. Ramadevi explained that the
University, International Skill Development Corporation (ISDC)
and The Association of Chartered Certified Accountants (ACCA) on
‘Commerce Education New Paradigms in Accounting and Finance’
at Dept. of Commerce, Osmania University was held and in the
inaugural session, Prof. Satyanarayana and Prof. Venkateswarlu of
Osmania University highlighted the need of correlation between
academic curriculum and the contemporary global accounting and
Financial needs. Thought provoking papers were submitted on
varied topics viz Correlation between EPS-Market Capitalization,
creative accounting, GST and Ind AS etc. by the young and
upcoming PG students and professors. Mr Alan Hatfield, Executive concepts of convincing nature, change, conviction, and commitment
Director, Strategy and Development of ACCA-UK (Association of are very vital for a woman to be a successful entrepreneur. Smt.
Chartered Certified Accountants of United Kingdom) spoke on 7 key Sujana Prabha explained about the "Abhaya Bharathi" program
quotients for a Professional Accountant. CMA Sekkizhar of Deloitte that was started by the Bharat Vikas Parishat, and how a proper
also chaired a panel discussion. On February 28, 2017 a Faculty education of the general behaviour of girls and boys will prove quite
Meet was conducted at Hotel Sitara, Ameerpet, Hyderabad and on beneficial to the society in eradicating the cases like ‘Nirbhaya’.
the same day, an Investor Awareness Programme was conducted for CMA Jyothi Satish, Treasurer, SIRC also added her inputs to the
faculties of different colleges at Hotel Sitara, Ameerpet, Hyderabad. program. The program concluded with the vote of thanks by CMA
Resource person CMA K.K. Rao explained the important areas to KVN Lavanya.

INSTITUTE NEWS
The Institute of Cost Accountants of India-Visakhapatnam renounced clinical psychologist, Government Hospital, Alapuzha
Chapter
and also consultant Psychologist, RBI, Trivandrum and a faculty
of Institute of Management in Government, Trivandrum. The
The Chapter organized a Professional Development Programme programme was well attended by the esteemed members and
on ‘Talk on Budget 2017’ on February 18, 2017 at its premises, CMA students of the chapter.
Bhawan. Speaker CMA K.N. Hari Hara Prasad emphasized the
amendments made in the union budget relating to indirect taxes
and another speaker CA T. Ramprasad emphasized the amendments
related to Direct Tax.
Western India Regional Council
The Region organized the inaugural session of 12 Days pre
campus orientation programme of WIRC at Mumbai on March 15,
2017 inaugurated by Mr. A.K. Chaturvedi, Regional Director, MCA.
Mr. Syamal B Bhattacharya, EX ED. BPCL, CMA Kailash Gandhi,
Vice Chairman, WIRC, CMA Deepak Ukidave, Faculty Member, CMA
Dhaneshchandra P. Revawala, Sr. Member were among the eminent
dignitaries present during the session.
The Institute of Cost Accountants of India-Trivandrum

Chapter
The Chapter with Celebrus Capital Ltd, Trivandrum jointly

organised a PD programme on February 2, 2017 on the theme
‘Impact of Union Budget and Investment Opportunities in Stock
The Institute of Cost Accountants of India-Pimpri Chinchwad

Akurdi Chapter
The Chapter organized a seminar on ‘Discussions on Union
Market’. Shri Girish Kulmar P S., Equity Analyst of Celebrus Capital

Ltd., Trivandrum was the speaker of the programme. On February
5, 2017 the chapter organised a PD programme on the theme ‘Stress
How to manage it effectively’ and speaker was Dr Ajith Kumar, a
Budget 2017’ on February 3, 2017 at CMA Bhawan. CMA Bappa

Majumdar, Managing Committee Member of the chapter in his

speech highlighted the changes in Direct Taxes and CMA L D Pawar, RCM & Secretary, WIRC briefly focused on the changes in various
sections of Finance Act under service tax, changes in central excise and customs.
The Institute of Cost Accountants of India- Surat South Gujarat Chapter
On February 18, 2017 the chapter organized a CEP on ‘Export

Import’ at its office. Mr. Mahendra Khare, the faculty, elaborated
on the topic and explained in details the definition of valuations
in customs, import export procedure, duty drawbacks and baggage
etc. The Chapter organized an educational tour to M/S. Balaji Wafers
Pvt. Ltd., Valsad on February 11, 2017 especially for final year students
under the guidance of chairman of the chapter. Ms. Nishitha Panchal,
Hr. Executive, Balaji Wafers Pvt. Ltd., Valsad Professional Educational
Head guided the students beautifully with demonstration. The
Chapter arranged Press Meet with local media on February 23, 2017 at
Chapter’s Office. CMA Manubhai Desai, chairman of the chapter and CMA
Brijesh Mali, managing committee member representing from the chapter’s
side, provide Information to the media about result for December 2016 session & silver jubilee function of the chapter.
The Institute of Cost Accountants of India- Navi Mumbai Chapter
The Chapter organized a CEP programme on the theme ‘Budget

Connect 2017’ on February 5, 2017. The speaker for this event was CA
Subhasis Banerjee, Practicing Taxation Expert in Navi Mumbai. The
speaker in his lucid style elaborated the topic and explained in details
the definition of various new rules and provisions covering Direct taxes,
Indirect Taxes and other related issues, followed by lively interactions
with the participants. Members from service and practice, including
students participated actively in the CEP Programme.

FROM THE RESEARCH DESK
Role of CMAs in
Municipality, Panchayati Raj and
Rural Development
Women Empowerment: It has to be considered that the inclusion Public Private Partnerships (PPP): The PPP serves as a
of well-qualified women in village Panchayat Institution in rural mechanism for the government to carry out rural development
areas would be an important instrumental measure in planning through infrastructure construction, while at the same time
for improving social status and empowering women. This group minimizing the risks and heavy drain on government budgets. The
of women, if provided representation at village Panchayat private sector can invest heavily as it has the resources to do so,
level can strongly rise in the issues related to the betterment and since these projects are for social good, the government plays
of women, can play dominant role in decision making process, a role in providing incentives to make it attractive enough for the
management of resources and make suitable recommendation private sector to invest, while at the same time ensuring that it is
for improving the status of women. To encourage women owned in a position to supervise and regulate the project. Hence it seems
businesses in India and promote women entrepreneurship, the amply clear that the government would like to harness private
Government has announced financial aid to Gram Panchayats in sector resources and channel it into ensuring economic growth.
India for Women Entrepreneurs. The CMAs can keep a track on The CMAs can assist the Government to select the effective PPP
allocation and apportionment of fund allotted to the rural woman Model by carrying out cost benefit analysis of a range of solutions
entrepreneurs. With their professional expertise can facilitate offered by the bidders. The CMAs are competent enough to assist
women entrepreneurs to take suitable strategies for business in project cost estimation, ensure optimum use of available
sustainability. resources and assist in monitoring and tracking of P3 project cost
for avoiding time and cost overruns.
Micro Credit: Micro Credit has emerged as a visible credit channel
to the poor as their access to conventional credit channels is Performance Audit: There are additional costs for PPP projects
constrained by the requirement of collateral and high transaction – usually the cost of borrowing money is higher for the private
cost. Although microcredit is lent to individuals as well as groups, sector than for the public sector and there are administrative
the Microcredit Institutions (MFIs) prefer the latter as it helps costs for the management of PPP contractual regimes.
to reduce transaction cost apart from contributing to prompt Transaction costs of PPP projects can also be substantial. PPP
repayment through peer pressure and to the empowerment of the projects may also impose many explicit and implicit liabilities on
beneficiaries. Community audit is highly beneficial in this context the government. Here, CMAs can carry out Performance Audit
for efficient utilization of financial assistance, mobilization of to assess whether the State Government have a well defined
savings, eradication of embezzlement of cash and surplus cash policy for rural development projects, whether efforts have been
management. CMAs can help out in proper auditing of accounts made to optimize the revenue sharing under PPP mode and due
on regular basis to provide the transparency and accountability diligence was carried out while fixing the revenue share, whether
among the members. SHG Audit is an effective medium as SHGs PPP projects were completed economically and appropriately.
enable women to grow their savings and to access the credit
which banks are increasingly willing to lend to rural poor for their Project Appraisal through Cost Benefit Analysis (CBA): Cost
socio-economic empowerment. benefit analysis is used mainly in the evaluation of projects or
project appraisal to optimize funding of money. Moreover the cost
Resource Mapping: Panchayats can realize the dream of rural benefit analysis is an economic tool that helps decision making
administration and rural development with complete coordination for project financing. CBA analyzes and describes in terms of
and transparency. It is evident from the data given that a huge costs, all benefits and results in order to achieve a goal. The CMAs
amount of funds is spent on the rural development by the through their professional expertise can carry out CBA analysis
government but this is not properly utilized. There is a huge to facilitate the Government for apposite planning, decision-
difference between the funds sanctioned by the government and making, evaluation and control project costing to determine the
funds utilized by the Panchayats. Here is a need to keep a strict profitability in addition to the feasibility of the project. For better
watch over the utilization of funds by Gram Panchayats. CMAs in transparency and effectiveness, Social Audit can be performed to
these regard can frame suitable strategies and help in Resource ensure that the activity or project is designed and implemented
Mapping for efficient utilization of resources and can keep track in a manner that is most suited for the prevailing conditions,
of allocation and apportionment of fund. Further, to add value appropriately reflects the priorities and preferences of those
they can identify areas where waste or misappropriation is affected by it, and most effectively serve public interest.
occurring.

CMA 2016-17
CAREER AWARENESS PROGRAMME
CAREER AWARENESS PROGRAMMES HELD DURING MARCH 2017
Date HQ/Region/Chapter/CMASC Venue
2/3/2017 Nellore Saastra College
2/3/2017 Durgapur Michael Madhusudan Memorial College
3/3/2017 Nellore B.V.S.M.C Girls High School
3/3/2017 Nellore S.R.R.Z.P High School
3/3/2017 Nellore R.S.R.M.C High School
3/3/2017 Nellore Y.V.M.C High School
3/3/2017 Nellore Govt. Girls High School, Mulapet
3/3/2017 Tiruchirapalli Urumu Dhanalakshmi College
4/3/2017 Nellore Jagan's Degree College
4/3/2017 Nellore Veda & Sanskrit High School
4/3/2017 Nellore Zilla Parishad High School, Buja Buja, Nellore
15/3/2017 Tiruchirapalli Aiman College of Arts & Science for Women
16/3/2017 Nellore NBKR Institute of Science & Technologies
16/3/2017 Nellore NBKR Science & Arts College
16/3/2017 Nellore D.R. Womens Degree College
16/3/2017 Nellore D.R. Womens P.G. College
16/3/2017 Nellore Audisankara College of Engineering Technology
18/3/2017 Nellore M.S.R. Degree College
18/3/2017 Nellore Sree Nethaji Degree College
18/3/2017 Nellore Sri Raghavendra Institute of Science & Technology
18/3/2017 Nellore S.V. Degree College

18/3/2017 Nellore Govt. Polytechnic College
19/3/2017 Nellore Govt. Degree College, Udayagiri
20/3/2017 Nellore Swarnandhra Bharathi Degree
20/3/2017 Nellore Srinivasa Degree Colege
20/3/2017 Nellore Govt Polytechnic College, Gudur
20/3/2017 Nellore S V Arts Science College
20/3/2017 Nellore Karunamai Degree College
20/3/2017 Nellore Vidyalaya Degree College
22/3/2017 Trivandrum Government Wormen's College, Trivandrum
27/3/2017 Tiruchirapalli Periyar E.V.R College
PROGRAMMES HELD IN FEBRUARY 2017 BUT REPORTED IN MARCH 2017

03.02.2017 NIRC & Kota Chapter Govt. Adrash Sr. Sec. School. M.N.3, Kota
09.02.2017 NIRC BRCM Public School, Vidyagram Bahal, Bhiwani
10.02.2017 NIRC M.L.M Sr. Secondary School, Sohansara, Tehsil Loharu, Distt - Bhiwani
11.02.2017 NIRC Genius Sr. Secondary School, Dhigawa Mandi, Distt-Bhiwani
13.02.2017 NIRC Govt. Sr. Secondary School, Dhigawa Mandi, Distt-Bhiwani
14.02.2017 NIRC Govt. Sr. Secondary School, Sohansara, Tehsil Loharu, Distt-Bhiwani, Haryana
14.02.2017 NIRC Arya Sr. Secondary School, Dhigawa Jatan, Distt-Bhiwani, Haryana
15.02.2017 NIRC Govt. Sr. Secondary School, Tehsil Loharu, Distt – Bhiwani, Haryana
21.02.2017 NIRC Gyan Kunj Sr. Secondary School, Tehsil Loharu, Distt. Bhiwani, Haryana
21.02.2017 NIRC Vivekanand Sr. Secondary School, Tehsil Loharu, Distt. Bhiwani, Haryana
22.02.2017 NIRC Ch. Bansi Lal Govt. College, Lohara, Distt-Bhiwani, Haryana
22.02.2017 NIRC Govt. College For Women, Tehsil Loharu, Distt-Bhiwani, Haryana
23.02.2017 NIRC Govt. College For Women, Tehsil Badhra, Distt. Charkhi Dadri, Haryana
Govt. Sr. Secondary School, V.P.O. Berala, Tehsil Badhra, Distt-Charkhi
25.02.2017 NIRC Dadri, Haryana
S.V.M. Sr. Secondary School, V.P.O Kadama, Tehsil Baddhra, Distt-Charkhi
25.02.2017 NIRC Dadri, Haryana
27.02.2017 NIRC Govt. College Bhiwani, Distt - Bhiwani, Haryana
PROGRAMMES HELD IN JANUARY 2017 BUT REPORTED IN MARCH 2017

03.01.2017 NIRC & Jaipur Chapter Madhu Bal Niketan Sr. Secondary School, Mansarovar, Jaipur
18.01.2017 NIRC & Kota Chapter Kendriya Vidyalia, NTPC, Anta (Baran)
18.01.2017 NIRC & Kota Chapter Govt. Sr. Sec. School, Anta (Saran)
27.01.2017 NIRC & Jaipur Chapter Parishkar College of Global Excellence, Mansarovar, Jaipur
29.01.2017 NIRC & Kota Chapter Sainath Edutech (P) Ltd., Talwandi, Kota
30.01.2017 NIRC & Kota Chapter Disha Delphi Public School (CBSE), Kota
* As reported till 01-04-2017

# The list may not be exhaustive

(STATUTORY BODY UNDER AN ACT OF PARLIAMENT)
INTERMEDIATE AND FINAL COURSE EXAMINATION TIME TABLE & PROGRAMME – JUNE 2017
PROGRAMME FOR SYLLABUS 2012 PROGRAMME FOR SYLLABUS 2016
Day & Date Intermediate Final Intermediate Final
Time: 2.00 P.M. to 5.00 P.M. Time: 2.00 P.M. to 5.00 P.M. Time: 2.00 P.M. to 5.00 P.M. Time: 2.00 P.M. to 5.00 P.M.
Sunday, Corporate Laws and
Financial Accounting Financial Accounting Corporate Laws & Compliance
www.icmai.in
11th June, 2017 Compliance
Monday, Laws, Ethics and Advanced Financial
Laws & Ethics Strategic Financial Management
12th June, 2017 Governance Management
Tuesday, Business Strategy & Strategic Cost Management –
Direct Taxation Direct Taxation
13th June, 2017 Strategic Cost Management Decision Making
Wednesday, Cost Accounting & Tax Management Direct Tax Laws and International
Cost Accounting
14th June, 2017 Financial Management & Practice Taxation
Thursday, Operation Management Strategic Operations Management &
Corporate Financial Reporting
15th June, 2017 and Information Systems Performance Management Strategic Management
Friday, Corporate Financial Cost & Management Accounting
Cost & Management Accountancy Indirect Tax Laws & Practice
16th June, 2017 Reporting and Financial Management
Saturday, Cost &
Indirect Taxation Indirect Taxation Cost & Management Audit
17th June, 2017 Management Audit
Sunday, Company Accounts and Financial Analysis & Strategic Performance Management
Company Accounts & Audit
18th June, 2017 Audit Business Valuation and Business Valuation
EXAMINATION FEES
Group (s) Final Examination Intermediate Examination
One Group (Inland Centres) Rs. 1400/- Rs. 1200/-
(Overseas Centres) US $ 100 US $ 90
123
Two Groups (Inland Centres) Rs. 2800/- Rs. 2400/-
(Overseas Centres) US $ 100 US $ 90
1. Application Forms for Intermediate and Final Examination has to be filled up either through online or in offline modes. The examination application form can also be downloaded from the Institute website
www.icmai.in and the student may apply in offline mode by attaching demand draft of requisite examination fees. Demand draft should be made in favour of The Institute of Cost Accountants of India,
payable at Kolkata. In case of overseas candidates, forms are available at Institute’s Headquarters only on payment of $ 10 per form. Online fees will be accepted through online mode (including Pay-fee
2April 2017
Module of IDBI Bank).
l
2. STUDENTS OPTING FOR OVERSEAS CENTRES HAVE TO APPLY OFFLINE AND SEND DD ALONGWITH THE FORM.
3. (a) Students can login to the website www.icmai.in and apply online through payment gateway by using Credit/Debit card or Net banking.
(b) Students can also pay their requisite fee through pay-fee module of IDBI Bank.
4. Last date for receipt of Examination Application Forms without late fees is 31st March, 2017 and with late fees of Rs. 300/- is 10th April, 2017. In case of online Examination Application with payment
gateway by using Credit/Debit Card or Net banking, the late fees of Rs.300/- will be waived and the last date for application is 10th April, 2017.
5. The Finance Act 2016 will be applicable for the Subjects Direct Taxation, Indirect Taxation(Inter) and Tax Management & Practice(Final) under Syllabus 2012 and Direct Taxation, Indirect Taxation
(Inter) Direct Tax laws and International Taxation and Indirect Tax laws & Practice (Final) under Syllabus 2016 for the purpose of June 2017 term of Examination.
6. The Companies (Cost Records & Audit) Rules 2014 as amended till 14 July 2016 will be applicable for Paper 10 - Cost & Management Accountancy (Intermediate) and Paper 19 - Cost and Management
Audit (Final) under syllabus 2012 and Paper 12- Company Accounts & Audit(Inter), Paper 19 – Cost & Management Audit(Final ) under Syllabus 2016 for June 2017 term.
7. The provisions of the Companies Act 2013 will be applicable for Paper 6 - Law, Ethics and Governance (Intermediate) and Paper 13 - Corporate Laws and Compliance (Final) under syllabus 2012 and
Paper 6- Laws and Ethics (Inter) and Paper 13- Corporate Laws and Compliance (Final) under Syllabus 2016 to the extent notified by the Government at least six months prior to the date of the
examination. For details visit clarification issued by Directorate of Studies.
8. If a student obtains at least 60 per cent marks in any paper, the benefit of carry forward/exemption is allowed for the immediately successive three terms of Examination only.
9. Examination Centres: Adipur-Kachchh(Gujarat), Agartala, Agra, Ahmedabad, Akurdi, Allahabad, Asansol, Aurangabad, Bangalore, Baroda, Berhampur(Ganjam), Bhilai, Bhilwara, Bhopal, Bewar
City(Rajasthan), Bhubaneswar, Bilaspur, Bokaro, Calicut, Chandigarh, Chennai, Coimbatore, Cuttack, Dehradun, Delhi, Dhanbad, Durgapur, Ernakulam, Erode, Faridabad, Ghaziabad, Guntur,
Guwahati, Haridwar, Hazaribagh, Howrah, Hyderabad, Indore, Jaipur, Jabalpur, Jalandhar, Jammu, Jamshedpur, Jodhpur, Kalyan, Kannur, Kanpur, Kolhapur, Kolkata, Kota, Kottayam, Lucknow,
Ludhiana, Madurai, Mangalore, Mumbai, Mysore, Nagpur, Naihati, Nasik, Nellore, Neyveli, Noida, Palakkad, Panaji (Goa), Patiala, Patna, Pondicherry, Port Blair, Pune, Raipur, Rajahmundry, Ranchi,
Rourkela, Salem, Sambalpur, Shillong, Siliguri, Solapur, Srinagar, Surat, Thrissur, Tiruchirapalli, Tirunelveli, Trivandrum, Udaipur, Vapi, Vashi, Vellore, Vijayawada, Vindhyanagar, Waltair and
Overseas Centres at Bahrain, Dubai and Muscat.
The Management Accountant

10. A candidate who is fulfilling all conditions specified for appearing in examination will only be allowed to appear for examination.
11. Probable date of publication of result: Inter & Final – 23rd August, 2017.
* For any examination related query, please contact [email protected]
123
DR. D.P. NANDY
Director (Examination)
Registered RNI 12032/66
Postal Regd. No. KOL RMS/139/2016-18
Publication Date: 10 April 2017
website:www.icmai.in
email:[email protected]

(Statutory body under an Act of Parliament)
Headquarters: CMA Bhawan, 12 Sudder Street, Kolkata - 700016, Ph: 091-33-2252 1031/34/35/1602/1492
Delhi Office: CMA Bhawan, 3 Institutional Area, Lodhi Road, New Delhi - 110003, Ph: 091-11-24666100
LARGEST CMA
BODY IN ASIA
5367
+X 2ND LARGEST CMA

-= BODY IN THE WORLD
REGIONAL COUNCIL OFFICES
Western India: Eastern India: Northern India: Southern India:
“Rohit Chambers”, 4th Floor, 84, Harish Mukherjee Road, 3, Institutional Area, Lodhi Road, 4, Montieth Lane, Egmore,
Janmabhumi Marg Fort, Kolkata - 700025 New Delhi - 110003 Chennai - 600008
Mumbai - 400001 Ph: +91-33-2455-3418/5957 Ph: +91-11-2461-5788, 2462- Ph: +91-44-2855-4443/4326
Ph: +91-22-2284-1138, e-mail: [email protected] 6678/3792 e-mail: [email protected]
2204-3416/3406 e-mail: [email protected]
e-mail: [email protected]
...where there are cost accountants,

correct assessment of its proper
growth & working can easily be made”
- Lal Bahadur Shastri
Former Prime Minister of India
Follow us on
Behind Every Successful Business Decision, there is always a CMA
Toll Free:1800 345 0092/1800 110 910

If undelivered please return to :
Directorate of Research & Journal, The Institute of Cost Accountants of India,
124 CMA Bhawan, 4th Floor, 84 Harish Mukherjee Road, Kolkata-700025

Management Accountant April-2017

Uploaded by

Copyright:

Available Formats

Management Accountant April-2017

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Management Accountant April-2017

Uploaded by

Copyright:

Available Formats

THE JOURNAL FOR CMAs

THE INSTITUTE OF COST ACCOUNTANTS OF INDIA

EXAMINATION TIME TABLE & PROGRAMME – JUNE- 2017

FOUNDATION COURSE EXAMINATION

Inland Centres Rs. 1200/-

2 The Management Accountant l April 20172 www.icmai.in

April 2017 VOL 52 NO.4 100

System of the Gram

4 The Management Accountant l April 2017 www.icmai.in

Shri Prabir Kumar Mukhopadhyay Real Estate Industry - Current Scenario

DEMONETISATION COST AUDIT

Truncated Boards of Public Sector Banks 60 Regulatory Requirements and Relevance in

GST Audit: Desirable by all stakeholders

The Management Accountant Journal is Indexed

www.icmai.in April 2017 l The Management Accountant 5

6 The Management Accountant l April 2017 www.icmai.in

Global Economic Sustainability

May 2017 June 2017

Ease of Doing Business in India

Key Driver of Competitiveness

Directorate of Research & Journal

www.icmai.in April 2017 l The Management Accountant 7

Success is no accident. It is hard work, per-

Patton Group. Swami Kripakarananda of Ramakrishna Mission

8 The Management Accountant l April 2017 www.icmai.in

www.icmai.in April 2017 l The Management Accountant 9

10 The Management Accountant l April 2017 www.icmai.in

www.icmai.in April 2017 l The Management Accountant 11

12 The Management Accountant l April 2017 www.icmai.in

www.icmai.in April 2017 l The Management Accountant 13

14 The Management Accountant l April 2017 www.icmai.in

CMA Santhosh Kumar M

16 The Management Accountant l April 2017 www.icmai.in

Source -14 th CFC Report.

Panchayat Raj Urban local bodies

Internal audit Internal audit

Audit by an Authority appointed C&AG Audit Social audit

www.icmai.in April 2017 l The Management Accountant 17

Statutory audit is envisaged as a complete audit where all aspects of

18 The Management Accountant l April 2017 www.icmai.in

Local Bodies are the most befitted by the auditing process.

www.icmai.in April 2017 l The Management Accountant 19

A Study on Internal Audit System of the

largely confined to acting as the delivery mechanisms of the

20 The Management Accountant l April 2017 www.icmai.in

Gram Panchayat Audit System in West Bengal

In terms of Section 186 of the Panchayat

In conducting the audit of PRIs, the auditor appointed by the State

Internal Audit of Gram Panchayat

www.icmai.in April 2017 l The Management Accountant 21

22 The Management Accountant l April 2017 www.icmai.in

In order to seek to address some of the issues around the Conclusion

www.icmai.in April 2017 l The Management Accountant 23

24 The Management Accountant l April 2017 www.icmai.in

www.icmai.in April 2017 l The Management Accountant 25

Anadi Biswas (2010), attempted to study on financial

Suman Chakraborty (2014) in their article discussed the

26 The Management Accountant l April 2017 www.icmai.in

www.icmai.in April 2017 l The Management Accountant 27