June 29, 2018

Speaking at ICMAI: Inaugural Session of International Conference, in New Delhi

I somehow feel that we have remained too petty in our thinking, so let’s focus on what outcomes we can given rather than struggling all the time about names. Ms Rachel Grimes, President of SAFA; Ms Tashia Batstone, senior Vice-President of the CPA from Canada; Shri VVS Jaganmohan Rao Garu, Vice-President of SAFA in CCM; CMA Mr P Raju Iyer, Central Council Member of the Institute, and distinguished delegates from India, from all over the world, ladies and gentlemen.

We have just had a very successful Annual General Meeting of the Asian Infrastructure Investment Bank (AIIB) in Mumbai, and it’s quite appropriate that we have the South Asian Federation of Accountants meeting today in Delhi, clearly demonstrating the growing clout that the Asian economies have today when it comes to international economies, international geopolitics. It also shows that in this world where there is growing protectionism, the Asian countries will also have to work as a team to address the challenges of tomorrow.

So, it’s very appropriate that the institute and SAFA have organised this two-day conference. I was just seeing the programme of the conference, some very interesting subjects that you are going to discuss, some very eminent speakers during these two days. And amongst the various subjects, while you are going to discuss artificial intelligence, you are going to discuss a connected world, planning for the future – one thing that really struck me as very interesting was your third technical session – the essence of reporting governance in sustainability moving towards integrated reporting. I think that truly is very well articulating the vision for tomorrow.

Mahatma Gandhi had said ‘customer is king.’ And if customer is truly king; each one of us has to ensure that we are serving the customer, both efficiently and effectively. To my mind, if the subject of costing is really taken to its logical end in terms of really getting the juice out of costing, getting the best outcomes from cost audits, from cost analysis, we can change the way businesses work. We can significantly improve bottomlines of companies, and we can impact the working of governments in a very-very big way.

Today is the day and age of competition. Competition requires cost cutting regularly, but without compromising on quality. There is a lot of management and strategic thinking that goes behind proper costing of products, proper planning both on efficiently delivering the goods, but finally also getting good toplines and bottomlines.

And I think any company or any organisation which doesn’t do its cost analysis right can never succeed in this very challenging world today. Technology, digitalization, growing use of internet; these are reducing costs, one time one could say yearly, another time we could say monthly, now I think costs are changing by the day.

I still remember a time when we were paying Rs 16.40 for one minute of calling on the mobile, not too far in the past. We are today looking at a zero cost on voice calling, or at least a near-zero cost. Data prices in the last few years have significantly fallen, the world is getting connected like never before. The world is becoming smaller and smaller, a place where sitting in Delhi or Mumbai, you could actually be working out the cost structure of a company in Canada, or a company in Argentina.

Data is playing an important role in how each one of us is going to do our job, data mining is determining how governments will work, how large organisations will carry out their functions towards better customer service and maximisation of profits. And all of these provide opportunities for each one of us in the accounting profession; it could be a cost accountant, could be a company secretary, could be a chartered accountant, could be a management accountant coming out of an IIM or any other management institute.

We have newer and newer opportunities emerging for each one of us as India in some sense engages with the rest of the world, brings in the best practices which we have seen in other parts of the world. And in many ways today, India is leading from the front. You mentioned about the case of GST, while we have GST probably in Canada, and in a few other countries, I don’t think any country of the size and scale of India has ever had the audacity or the capability of bringing about such a game changing reform to connect the entire country into one – one nation, one tax – is certainly not an easy task.

I still remember the first time this concept of one nation-one tax was articulated was somewhere in 2002 or ’03 when Prime Minister Shri Atal Bihari Vajpayee’s government had spoken about this. For 10 or 12 years after that we kept hearing on and off that GST and in different names and forms will be brought into India. One can do a lot of political blame game whether one allowed it or the other didn’t allow it, but the fact is it is incumbent on the leadership of the nation to bring all schools of thought on one page, build up a consensus, and most importantly, generate trust amongst all stakeholders to be able to bring so many different political parties, having different political ideologies on the same page.

But you have seen the deft handling of the entire process; we have had over two dozen or nearly two dozen GST Council meetings taking decisions unanimously in the best interests of the country. All rates fitment, policies, procedures, the legal framework has all been devised collectively by the central government and the states to come up with a framework, again, adopted by every state and Union Territory unanimously.

Day after tomorrow, we will be celebrating one year of the launch of GST. I remember in one of the comedy shows somebody saying that this is the first time I am hearing that a country can celebrate imposition of a tax. But I believe it’s a celebration of the federal structure of India. It’s a celebration that when it comes to what is good for the country everybody can come together on one page. It’s a different matter that after they come out of the GST Council meeting then you see a lot of comments being made which one cannot understand ‘andar kamre mein kuch aur tha, baahar kuch aur ho gaya’. But then there is a little bit of politics in everything, I think we should overlook that.

Celebration also, because instead of 40 inspectors addressing 17 taxes and 23 cesses in different forms, in different ways all around the country, you now have one tax, and some of you who are in business or who deal with tax authorities, I think that itself is a cause for big celebration. This is not an imposition of any new tax. It’s what was already there, but was hidden in 40 different pockets. So you had excise duty which was at source, but when the customer bought the goods, he could not see what is the embedded tax in the form of excise duty, in the form of various cesses, in the form of octroi, in the form of entry taxes, in the form of surcharges and what not have you.

All those hidden buckets were brought before the world and the people of India, so that everybody knows exactly what is the element of tax when he buys a final finished product. And to my mind, it’s a period of one year, to some it may seem long, but to those who understand what the tax administration means, who understand what it means to get 29 states, 7 Union Territories and a large central government machinery, all of them to get aligned and then implement it successfully on the ground, responding to customer feedback, responding to stakeholder issues that obviously were to crop up. On real time basis, quickly in a nimble fashion addressing concerns on the ground and then succeeding to get revenues at levels which were calculated literally on very-very rough estimations at one point of time and several years ago to actually achieve that kind of revenue within a span of one year and achieve that revenue with almost every item having a tax rate which is lower than the total taxes that were being paid earlier – which was the job of the fitment committee taking the weighted averages of the tax on each item and working out the slab in which the GST will be charged.

And why am I delving on this in such length is because all of this had an element of costing in it. We could have not done all of this but for the understanding of costing, and therefore, I think for your organisation to worry about whether you will be called one or the other or that name – who was that famous poet who had said ‘what’s there in a name?’ Shakespeare said that? I was not sure. I didn’t want to cut a sorry figure here.

So, I think we have to focus on what we can achieve, how we can make a difference to this country’s future. And towards that end the subject that you have picked up is extremely relevant. How the professionals of various accountancy bodies are going to prepare India to be future-ready. How we are going to all of us evolve in our jobs and each one has a job to perform, you may be doing whatever work but you do it well. You do it honestly. Do it with the highest standards of ethics and morality. You do it painstakingly with care and detail.

That truly is the challenge before all of us. And I have no doubt the ICAI which is the second largest such association in the world I believe, with 74,000 members. First in Asia, largest number of members in Asia, but that also I think gives us an opportunity to become leaders in Asia. 500,000 students I am told!

That’s the scale of influence that we can have as a professional body on the future of India, and if each one of us takes it upon ourselves that I am going to be the change that I want to see in the country. I am going to be the instrument of change that I wish to see in my country. I will lead from the front. I will make a difference to the way things are done. And picks up that challenge, individually and collectively, the outcomes can be phenomenal.

So much disruption through technology, through digitization is happening, how artificial intelligence can be put to good use. How we can in the concept of integrated accounting look at the big picture holistically, yet not compromise on the detail. I think the time has come that we prepare ourselves, instead of having to worry about becoming wiser in hindsight. Instead of becoming wiser in hindsight, can we have better insight today so that our hindsight and our today can both merge into one?

And it’s possible, very-very very much imminently possible and doable. It’s for us to decide with what high level and standards we are going to do our job, we are going to perform our functions and we are going to come out with our reports. I have personally had some very good experiences when it came to using costing in my work in government.

If I can pick up any example from any of the Ministries, if we take the railways, it’s so obvious that if you are going to give an order sparingly, sporadically for rail wagons which doesn’t give any sense of certainty to your suppliers you are never going to be able to get the best of pricing. So you are ordering 6000 wagons today, then you don’t know when the next order is going to come. Maybe 3 months/4 months later you will suddenly say I want 30,000 wagons; by the time the ordering has to be done you may choose that I want to reduce it to 10,000 and then for 2 years you don’t give out any orders at all.

I thought elementary costing tells me that if we two need wagons we can do an efficient calculation of what you will need in the next 5 years. At worse, you may go off the mark 2-3-4-5%. You may need some a little earlier, you may need some a little later, but if my suppliers know jolly well that what is the order quantity that is going to come to them for the next 5 years. They will prepare their supply chain more efficiently. All the components that go into the wagon, all of those businesses will prepare their production processes to meet that demand and you will have a far more organised industry, by which to my mind, we can easily reduce our costs quite significantly.

The steel mill knows how much steel is going to be required year on year, your wheel manufacturer knows how many wheels are going to go, month on month, day on day. And it just goes on and on. Cables, the braking systems, there are so many components that go into it, and the whole value chain will affect millions of people and livelihoods. But that uncertainty has to be removed. And when I did an assessment I realized that we were looking at nearly a demand of a 100,000 wagons that this country will need, because one will also have to plan that we have a dedicated freight corridor, started in 2007-08 but nothing happening for 5-7 years.

That’s a very sad commentary on the way things were done. But now picking up speed in the last 3-4 years with focused effort to complete it in a time-bound manner, but when the DFC comes up if I don’t have wagons to move that freight you will have a 100,000 crore rupee asset, nearly $15 billion asset, lying idle now waiting for the wagon manufacturers to give you wagons – because we don’t do integrated thinking and integrated accounting.

But if we plan from now that we know what stages the DFC is going to come, we know how power demand is going to go up and coal has to moved, how steel production will go up, sales expansion plan, JSW’s expansion plan, TATA’s expansion plans, you visualise what kind of volumes you will need to move. And you see you have a 100,000 wagons order, if you can give out a contract for five years consistently telling your supplier what he needs to plan for, how he needs to ramp up his technology, what he needs to do to bring in efficiency. And, of course, I don’t think famous is the word, but I have probably become infamous for all the reverse auctions that I have been doing, which will now also be introduced in railways, so that we can capture value for the railways and get the most efficient prices.

The other day, two-three days back there was an article about the railway wagons companies share prices falling, because I am going to introduce reverse auction. I think it’s quite silly whoever has made that analysis. On the contrary, a) with stable orders for a longer period, with their ramping up and becoming more efficient in their operations and with reverse auction rewarding the more efficient companies, I think the efficient companies are going to have a golden period ahead of them. And I am sure you will all agree with me, it’s not government’s job to be supporting the inefficient. It’s not my job that I burden all of you with higher freight charges or higher passenger charges on railways to pay for somebody else’s inefficiency.

Efficient will flourish, which is good for the economy, good for the nation: the laggards will make an effort to become efficient and compete better, and in the process, there maybe one or two failures. But I certainly believe that the people of India deserve a better deal, the people of India demand from us accountability to make sure we have done the best we could in our job, respective jobs, me in my role, you in your role.

And, therefore, I think this will only help to make the business and systems more organised, more efficient, both cost effective and quality effective. And so far, I think this has helped government save billions of dollars, this approach of bringing in high standards of accountability and transparency, ensuring fair competition and equal opportunity for all.

I won’t labour my example of LED bulbs, because I think many of you may have heard it before, but anywhere in the country where I go or where the honourable Prime Minister goes, we are being acknowledged that India leading the world on LED revolution has actually brought down the price of LED bulbs worldwide.

India has benefitted significantly. The price of LED lighting has fallen by nearly 87% in a short span of 18 months – 87% fall, and mind you with no quality compromise. In fact, the luminares have increased, from 7 W bulb to 9 W bulb, we have given additional 30% lighting. But a bulb which government used to purchase for 310 Indian rupees, the world’s largest lighting company, Philips, bid in a transparent and fair auction method and won that contract to give 50 million bulbs for Rs 38.

310 become 38! I don’t know where the rest of the money used to go, some of it, of course, would be benefits of economies of scale. But I don’t know how much of it was because of a fair and transparent and honest method, which is what we as cost accountants have to do. There is a cost to integrity also. There is a cost of corruption that we have to pay, which we can highlight, which we can bring to the fore. Is there a better way to do the job, whether in the private sector or in government. We have to come out with that recommendation.

Well, we decided to do this programme at the Taj Palace. Certainly, a lovely location and a great location, I am here I think every second or third day. But I am sure the institute might have seen whether Oberoi gives them a better deal and has equal facilities, whether Maurya gives them a better deal. And then we negotiate hard to get the best out of the different places. Okay, what are the freebies you will give us, how many free rooms so that Ms Rachel can stay there.

We do all that, don’t we? Should not the government be doing that also? Because after all, we are using the money that you have paid in your taxes, and I think that’s what we are trying to do in this government. Bring out standards of transparency and bringing in competition like never before, it involves a lot of mindset change. I know that many people may not like the way the government led by Prime Minister is trying to change the way of doing business, probably, over many years, or rather many decades we are used to a certain style.

It takes a little time to adjust to the new normal. But I think this country wants to engage with this new normal. And in every engagement, every occasion where I have raised this issue, my own experience I will share with you, please do not take it, Amit, Sanjayji or any of our senior members here or Mr Rao. People in our age group, the elders in this room are far more resistant to that change. We are all the time cribbing that, Modiji bahut tang karte hain, Modiji is troubling us a lot. Too many changes happening, one after the other something is happening to try and eradicate black money, to eliminate corruption. It should not be so fast; it should be slow, that’s what we all talk.

But it’s the younger generation in the row, which is most enthused by this, because they know that all of this is going to give them a better future. It is the youth who doesn’t want to sleep at night with the tension that tomorrow morning I could have a problem. He wants to work hard, work honestly, party hard at night, sleep well, get up fresh in the morning, pick up a fitness challenge, go to the gym and then get to work with the confidence that I am doing a clean honest day’s job, I have nothing to worry.

That’s what India and the future of India and the youth of India want. And to my mind, that is what the world is recognizing today. After all, when Mr Modi gets such a wonderful reception wherever he goes, none of us be mistaken that it is for Mr Modi as an individual, it is for 1.2 billion Indians who are being respected in the world today. Mr Modi is only a representative of each one of us in this room that respect is for each one of you that the Russian President for the first time in the history of Russia comes to the airport to see your Prime Minister Modi.

We see all those visuals, some opposition parties may even try to ridicule it, but I think it’s that diffidence or difficulty in accepting how the rules of the game have changed, how the country’s image is today changed in the world, how on every international fora we are respected today as the world’s future, as an emerging power, a market of a 1.2 billion people, probably the largest market today in many-many ways of an aspiring billion people looking for a better quality of life.

It is for us now to understand our own strength, and instead of cribbing it is for us to use this opportunity, to grab this opportunity how we can do our work better. And in that, when we are trying to change the world and in the world I am here trying to refer to India, I think the Institute of Cost Accountants of India and all of you professionals can truly play a game changing role, can play a big role to help us succeed in that change.

You can all become ambassadors of this change to educate the people that what is happening despite the short run issues that some may have had to face is good for the country, is good for the citizens of this country. The new India that you talked of also that new India while we are aspiring that by 2022 when we turn 75 as an independent India, every citizen has a roof on his head, a toilet in his home, 27/7 electricity, good drinking water, connectivity, road connectivity, communication, internet connectivity, quality healthcare, quality education; all of this is possible only when we have an honest country and all of this will be incomplete unless each one of us can sleep in our homes peacefully at night with the confidence that this is an honest country where I do not have to worry. I have done my job honestly and I don’t have to worry.

Very often, there will be issues, there will be problems, there may be sometimes problem which may not be correct also, we may face a problem where we are confident that we have done no wrong, but India has a robust judicial system. India has a robust rule of law. A few aberrations should not define the future of India. I think we all have to work together as a team, it’s only teams that are successful. As they say, together we can move mountains. Individually, we may be able to do less, but individual contribution in that togetherness is what matters the most and therefore let us all work together within the institute, within our profession, in our engagement with other sister organisations and other professional bodies.

And in some way become the doctors of business, helping businesses if they already have an illness to come out of the illness, cure that illness, but ideally, to become doctors of preventive medicare, so that we work as partners with business, as partners with government to ensure the health of our nation, the health of our society, both on the predictive side and the curative side for whatever has happened in the past, work towards bringing in the highest levels of ethics, probity, transparency, honesty, accountability, so that collectively, we can all leave behind a better nation for our young boys and girls. Never in the future should any child born in the country ever have to look back and say that these guys had an opportunity but they let our country down.

Thank you very much.

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