Management Accountant May-2016

THE JOURNAL FOR CMAs
MANAGEMENT
THE
ACCOUNTANT
ISSN 0972-3528 May 2016 VOL 51 NO. 5 Pages - 124 100
STRATEGIC
COST
MANAGEMENT
IN TELECOM SECTOR
THE INSTITUTE OF COST ACCOUNTANTS OF INDIA

(Statutory body under an Act of Parliament) www.icmai.in 1
www.icmai.in May 2016 1 The Management Accountant
37th Cost Conference 2016
Organised by
( Statutory Body under an Act of Parliament )
EASTERN INDIA REGIONAL COUNCIL
Theme :
Managing cost and taking successful business decisions
– Competency of CMAs
th th
on 11 & 12 June, 2016
at Science City, Mini Auditorium,
Kolkata
Behind Every Successful Business Decision, There is always a CMA
The Management Accountant 2 May 2016 www.icmai.in

The Institute of Cost
Accountants of India
PRESIDENT THE INSTITUTE OF COST ACCOUNTANTS OF INDIA
CMA Pramodkumar Vithaldasji Bhattad
(erstwhile The Institute of Cost and Works Accountants
[email protected]
VICE PRESIDENT
of India) was first established in 1944 as a registered
CMA Manas Kumar Thakur 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, CMA Ashok Bhagawandas Nawal, On 28 May 1959, the Institute was established by a
CMA Avijit Goswami, CMA Balwinder Singh,
special Act of Parliament, namely, the Cost and Works
CMA Biswarup Basu, CMA H. Padmanabhan,
CMA Dr. I. Ashok, CMA Niranjan Mishra,
Accountants Act 1959 as a statutory professional body for
CMA Papa Rao Sunkara, CMA P. Raju Iyer, the regulation of the profession of cost and management
CMA Dr. P V S Jagan Mohan Rao, accountancy.
CMA Sanjay Gupta, CMA Vijender Sharma It has since been continuously contributing to the
GOVERNMENT NOMINEES growth of the industrial and economic climate of the
K.V.R. Murthy, Surender Kumar, Sushil Behl,
country.
Ajai Das Mehrotra, P.K Mishra
The Institute of Cost Accountants of India is the only
Secretary recognised statutory professional organisation and
CMA Kaushik Banerjee, [email protected] licensing body in India specialising exclusively in Cost
Sr. Director (Finance) and Management Accountancy.
CMA Arnab Chakraborty, [email protected]
Sr. Director (CAT, Training & Placement)
CMA L Gurumurthy, [email protected]
Sr. Director (Technical)
CMA J K Budhiraja, [email protected] MISSION STATEMENT
Director (Examinations)
CMA Amitava Das, [email protected] The CMA
Director (Finance) Professionals would
CMA S R Saha, [email protected] ethically drive enterprises globally
Director (Administration & HR)
by creating value to stakeholders
CMA S C Gupta, [email protected]
Director (Research & Journal) & Editor in the socio-economic context through
CMA Dr. Debaprosanna Nandy, [email protected] competencies drawn from the integration of
Director (Membership) strategy, management and accounting.
CMA A S Bagchi, [email protected]
Director (Discipline) & Jt. Director
CMA Rajendra Bose, [email protected] VISION STATEMENT
Additional Director (IT)
Smt. Anita Singh, [email protected] The Institute of Cost Accountants of India
Joint Director (Tax Research)
CMA Chiranjib Das, [email protected]
would be the preferred source of
Joint Secretary & In-Charge (CPD) resources and professionals for the
CMA Nisha Dewan, [email protected] financial leadership of
Joint Director (PD) & In-Charge (Infrastructure)
enterprises globally.
CMA Kushal Sengupta, [email protected]
Joint Director (President’s & Vice President’s office)
CMA Tarun Kumar, [email protected]
Joint Director (Studies & Academics)
CMA Sucharita Chakraborty, [email protected]
IDEALS THE INSTITUTE STANDS FOR
Deputy Director (Advanced Studies)
CMA M.P.S Arun Kumar, [email protected] • to develop the Cost and Management Accountancy profession
Editorial Office • to develop the body of members and properly equip them for functions
CMA Bhawan, 4th Floor, 84, Harish Mukherjee Road, Kolkata-700 025
Tel: +91 33 2454-0086/0087/0184 , Fax: +91 33 2454-0063 • to ensure sound professional ethics
Headquarters
CMA Bhawan, 12, Sudder Street, Kolkata 700016 • to keep abreast of new developments
Tel: +91 33 2252-1031/34/35 , Fax: +91 33 2252-7993/1026
Delhi Office
CMA Bhawan, 3, Institutional Area, Lodi Road, New Delhi-110003 Behind every successful business decision,
Tel: +91 11 24622156, 24618645 ,Fax: +91 11 4358-3642
WEBSITE there is always a CMA
www.icmai.in

Mayy 2016
Ma
ICNSIDE E
OVER STORY
Y
May 2016 VOL
L 51 NO. 5 100
16
TTelecom Sector Reform
eform in India
ef
24
Universal Service Obligation Fund
und in TTelecom Industry
Strategic Analysis -
31
A Case Study of Indian TTelecom Industry
Does W
Working Capital Policy
olicy Aff
Affect Profitability?
An Introspection of Central
tral TTelecommunication
37
Companies in India
IFRS 15
43
in TTelecommunication Industry
47
Accounting Separation Report
eport In TTelecom Industry
MAKE IN INDIA
Mak in India -
Make
50
Need ffor an integrated approach
DISCLAIMER SW CHH BHARA

SWA BHARAT CESS
55
Swachh Bharat Cess - A critical analysis

COST AUDITING STAND
T
TANDARDS
60
Are Standards on Cost Auditing mandatory for Audit of Cost Records?
DIGITAL MEDIA
DIGIT
72
Digital Media Campaigns: Strategic Implementation
MANAGEMENT ACCOUNTING
78
Revisiting the Reinvestment Rate
CASE STUDY
84 6
Working Capital Management in TTata Motors Ltd
W Editorial
7
President's Communique
11
FFrom the desk of MI - T & P
12
Glimpses of 43rd SSAF
AFA
AFA Board Meeting
13
ICAI-CMA Snapshots
Celebrating W
Womanhood: Enlightenment through
15
Education
ducation and EEmpowerment through Entrepreneurship
71
World Earth W
W Week Snapshots
96
Institute News
COMP
COMPANIES ACT
106
88 FFrom the Research Desk
An Introduction to NCLT
Economyy & TTax Updates 108
TAXATION
TAXA
AXATION
115
International Summit 2016
Ready Reckoner
eckoner
eck oner ffor
or Applicability of Service TTax
ax on
91 120
services provided by Government & Local Authorities World Earth W
W Week - A Report

EDITORIAL
Greetings!!!
the terms and conditions of the license.
The telecom services have been recognized Telecommunications Dispute Settlement
as an important tool for socio-economic and Appellate Tribunal (TDSAT) was set
development for a nation. It is one of up to adjudicate any dispute between a
the prime support services needed for licensor and a licensee, between two or
rapid growth and modernization of more service providers, between a service
various sectors of the economy. Indian provider and a group of consumers, and to
telecommunication sector has undergone hear and dispose of appeals against any
a major process of transformation through direction, decision or order of TRAI. The
significant policy reforms, particularly Act also empowers TRAI to lay down the
beginning with the announcement of NTP standards of quality of service and ensure
1994 and was subsequently re-emphasized compliance, specify the tariff policy and
and carried forward under NTP 1999. make recommendations. TRAI’s scope
It defined certain important objectives, of work also includes issues relating to
including availability of telephone on telecom and cable tariff policy, commercial
demand, provision of world class services and technical aspects of interconnection,
at reasonable prices, improving India’s free choice and equal ease of access for
competitiveness in global market and the public to different telecom services,
promoting exports, attractive FDI and resolution of conflicts that may arise
stimulating domestic investment, ensuring due to market developments and diverse
India’s emergence as major manufacturing network structures for various telecom
and export base of telecom equipment services. TRAI also facilitates development
and universal availability of basic telecom of forums for interaction amongst service
services to all villages. It is also announced providers and interaction of the Authority
a series of specific targets to be achieved with consumer organizations to promote
by 1997. Latest NTP-2012 has been framed consumer interest.
to facilitate the general public by making
available affordable, reliable and secured India will emerge as a leading player in the
telecommunication and broadband virtual world by having 700 million internet
services across the nation. Driven by users amongst 4.7 billion global users by
various policy initiatives, the Indian 2025, as per a Microsoft report. With
telecom sector witnessed a complete the government’s favourable regulation
transformation in the last decade. It has policies and 4G services hitting the market,
achieved a phenomenal growth during the the Indian telecommunication sector is
last few years and is poised to take a big expected to witness fast growth in the next
leap in the future too. few years.
The Telecom Regulatory Authority of This issue also presents a good number of
India (TRAI) is a statutory body set up for articles on the cover story theme ‘Strategic
regulating the Telecom and Broadcasting Cost Management in Telecom Sector’ by
Sectors. TRAI was created by enacting the distinguished experts and authors. We
TRAI Act 1997 (as amended in the year look forward to constructive feedback
2000). This Act, along with the notification from our readers on the articles and overall
of the Government dated 9th January development of the journal. Please send
2004, empowers TRAI to recommend your mails at [email protected]. We thank
conditions for entry of new telecom service all the contributors to this important issue
providers as well as ensure compliance of and hope our readers enjoy the articles.

PREsIDEnT’s COmmunIqué
When life is sweet, say thank you and celebrate. And

when life is bitter, say thank you and grow.
Shauna Niequist
My Dear Professional Colleagues,
Namaskar.
You are aware that the Ministry of Corporate Affairs had given the
task of developing 15 Standards on Cost Auditing (SCAs) upto 31st
March 2016 and submitting the same to Government for its approval.
I am happy to inform you that the ‘Cost Auditing and Assurance
Standards Board’ of the Institute has completed the task and the
standards have been sent to the Central Government for its vetting and
approval. Compliance of the approved SCAs will be mandatory under
CMA P. V. Bhattad section 148(3) of the Companies Act 2013 by the cost auditors auditing
President the cost records. It is necessary on the part of the Institute to create
The Institute of Cost awareness of the SCAs among the members of the Institute so that they
Accountants of India will be able to carry out their professional assignment properly. It is
pertinent to mention that Cost Accounting Standards (CASs) developed
by the Institute are also mandatory for being applied by the Cost
Auditor. In order to impart knowledge and discuss the technicalities,
practical aspects and implications of SCAs and CASs, the Institute is
organizing seminars, webinars and programs on pan India basis.Details
of these programs, seminars and webinars can be obtainedfrom the
website of the Institute. I urge members of the profession to attend
these programs, seminars or webinars to update professional skills and
enrich knowledge.
Representation to expand the coverage of Cost Rules

You are aware that many sectors of economy are still excluded from
the coverage of Cost Rules. In order to expand the coverage of Cost
Rules, the Institute has submitted representations to various ministries
to include companies engaged in food processing, producing packaged
food products, motor vehicles, Textiles etc. so as to maximise the
benefits of Cost Audit system to the Government. Many companies
engaged in producing goods that yield high tax revenues, are not
covered under the notified Rules for cost records and audit. This limited
coverage does not provide complete data to the government agencies
and tax authorities. In order to help the government and corporates
to reconcile the revenue receipt &payment and improve efficiency,
productivity, cost competitiveness, profitability and sustainability,
CBEC and Competition Commission of India have been requested by the
Institute to recommend that all companies engaged in the strategically
important sectors should be covered for maintenance of cost records
and audit.

qué
Criterion to select Cost Auditor in PSUs actively participated and made the program a grand
I wish to inform that the Institute has requested success.
Department of Public Enterprises and SCOPEto
consider forwarding to all the PSUs,the standard Initiatives by various departments of the Institute
criterion to select firms of Cost Accountants for
Cost Audit and other related services for improving Advanced Studies Department
the company’s efficiency, productivity, cost I am sure the students of three Diploma Courses
competitiveness, profitability, and sustainability. viz Diploma in Business Valuation, Diploma in IS
Regular follow up is going on and a meeting to Audit and Control and Diploma in Internal Audit
discuss the issue is expected to take place early next must be watching the webinars conducted by the
month. department in order to disseminate the necessary
knowledge and information.
Introduction of Peer Review System
I am pleased to inform you that the Council of the CASB Initiatives
Institute has finalised the long awaited Peer Review Cost Accounting Standards Board (CASB) has
System (PRS).PRS is a mechanism of evaluating released the exposure drafts for public comments/
the professional/audit and assurance activities/ suggestions on Cost Accounting Standards on
services carried out by a Firm by peers by looking “Overburden Removal Cost” and Guidance Note on
into the systems and procedures adopted and ‘Treatment of Costs Relating to Corporate Social
records maintained while carrying out professional/ Responsibility (CSR) Activities’. CASB has approved
audit and assurance activities with the objective the Exposure Drafts for Guidance Note on CAS-13-
to evaluate and suggest improvements of systems, Service Cost Centre, which is being exposed shortly
procedures and quality of reporting. The purpose of to public for comments/ suggestions.I request
PRS is to audit the quality of service rendered by all stakeholders to send the views/ suggestions/
Firms leading to enhanced credibility, transparency, comments within the stipulated time on the exposure
adopting best practices and imparting knowledge drafts hosted on the Institute website, so that these
and skills. The objective of PRS is to ensure that in draft standard/guidance notes may be improved
carrying out the professional/audit and assurance by the Board before these are finally issued for
activities/services, the members of the Institute stakeholders.
comply with Technical, Professional and Ethical
Standards as applicable including compliance CAT Initiatives
of other regulatory provisions and requirements The success story of CAT with the ASAP,
thereto and have in place proper systems including Government of Kerala continues and based on our
documentation thereof, to adequately exhibit the past performances, ASAP has assigned another batch
quality of the professional/audit and assurance of students for imparting CAT Course in Kerala. I am
activities/services. The objective is also to ensure happy to share that campus placement program for
that they are compensated properly. CAT qualified students has been scheduled in Jaipur/
Delhi and Thiruvanathapuram in the month of May
World Earth Week 2016 and I wish all the participating CAT students
The Committee on Corporate Laws, Governance success in these campus placement programs.
and Corporate Sustainability celebrated the
World Earth Week from 16th to 22nd April 2016 CPD Initiatives
by organizing programs on climate change, You may be aware that it is mandatory for the
sustainability, environment accounting and auditing members holding Certificate of Practice (COP)
and integrated reporting at various places in the to undergo minimum mandatory training of 15
country. Knowledge pack titled “Contemporary hours per year commencing from 1st April to 31st
Issues in Environmental Accounting & Auditing” was March. If the COP is not renewed for the year 2016-
released at the start of the week on 16th April 2016 17 owing to shortfall in CEP hours, it might cause
by Shri Anil Shirole, Hon’ble Member of Parliament hardship to those members who thrive exclusively on
at Pune. Several Chapters and Regional Offices have practice notwithstanding the fact that compliance

of prescribed minimum requirement of CEP hours be duly represented by the Institute.
is mandatory for renewal of Certificate of Practice.
Therefore, it is decided by the Council to grant an Membership Department:
extension upto30thJune 2016 to complete the Members in practice are kindly aware that
requirement of CEP credit Hours for renewal of COP Certificate of Practice (CoP) is valid till 31stMarch
of the members for the year 2016-17. each year. Membership fees fall due on 1stApril each
year and I request all members to clear their dues of
I am pleased to know that the webinar on ‘CENVAT 2016-17 at an early date and continue to enjoy the
Credit Rules, 2004 – Critical Issues’ was well received benefits of membership.
by the members. For those who could not attend
the webinar, recording is available on Institute’s Placement Initiatives
website under Featured Links.I sincerely appreciate I am happy to share that the first round of Campus
the efforts of Regional Councils and Chapters Placement Program conducted for December 2015
in organizing various programs, seminars and qualified students has been successfully completed
discussions on the topics of professional relevance with the participation of 36 companies. 129 CMAs
and importance for the members. The presentations could find their future during the placement
of these programmes are available in Knowledge program. The campus placement program is a
bank on the website of the Institute. continuous process and I am sure maximum students
will find placements through this initiative. I wish
Examination Directorate all the young CMAs a great success in their new
The Examination Directorate is engaged in assignments and expect them to contribute to the
preparation for holding June 2016 examination for growth of their respective organisations. I also invite
Foundation,Intermediate and Final courses. I wish them to become members of this great Institute and
to inform that from this term Foundation course thereby continue to guide the future CMAs.
examination will be conducted in descriptive (pen
and paper mode) with each Paper of 100 marks Professional Development
with 3 hours duration. I advise all the examinees to PD Directorate is sending representations
prepare hard and excel in the examinations. I wish to various organisations for inclusion of cost
them all the best. accountants for providing professional services in
the area of Accounts, Internal/ Concurrent Audit,
International Affairs Taxation, Stock audit and other assignments. Please
I attended the SAFA Board meeting at Mumbai visit the PD portal for more details. Other initiatives
along with CMA Sanjay Gupta, Chairman, WTO, are listed out in the following lines:
International Affairs & Sustainability Committee and i PD Directorate represented before the
CMA Dr. PVS Jagan Mohan Rao, CCM & Chairman Chief Minister and Deputy Chief Minister
PAIB Committee of SAFA on 24th April 2016. As part of NCT of Delhion the issue of formulating
of SAFA Events, meeting of the PAIB Committee of and determining the ideal cost structure of
SAFA was conducted on 22nd April 2016 wherein the Private school tuition fees and appealed for
Book titled “Contemporary Issues in Sustainability inclusion of Cost Accountants for providing
Accounting & Reporting”, developed by the Research professional services in the similar area of
and Journal Department of the Institute, was other assignments.
released by Mr. Stathis Gould, Head of PAIB and i Ministry of Road Transport and Highways
Integrated Reporting Lead, IFAC. To commemorate has included Cost Accountants for their
the World Earth Day, Chairman of the Committee empanelment in NHAI as Concurrent Auditor/
presented the sapling to Mr. Stathis Gould. I also Internal Auditor in Model Concession
presented this book to SAFA President and Vice Agreement (MCA) on infrastructure for PPP
President during the SAFA Board meeting which was Projects in Highways.
very well received by the SAFA Board members. The i PD Committee is in process of preparing the
next CAPA Events are schedules from 16thto 19th Guidance Note on the Concurrent Audit of
May 2016 at Kuala Lumpur, Malayasiawhich shall Commercial Banks, Monograph on Internal

Audit of Treasury Functions of Commercial Banks i On personal meeting of Vice-President of the

and Monograph on Risk Based Internal Audit of Institute with the officials of Bihar State Power
Commercial Banks. The publications are expected to Holding Company Ltd. (BSPHCL), BSPHCL has
be released soon. revised the recruitment criteria for 52 posts of
i PD Committee, in association with PHD Chamber Accounts Officers to include Cost Accountants with
of Commerce and Industry, organized Seminar other professionals. The last date for applying has
on the theme “Impact of Changes in Service Tax, also been extended.
Excise, and Customs vide Union Budget, 2016” on
Thursday, 21stApril at New Delhi.Seminar was first I advise all the members to interact with the local
of the Annual Workshop Series on Indirect Taxation corporates and state government officials for enhancing
with specific relevance to GST for the year 2016- the scope of CMA fraternity within the framework of law
17 covering Service Tax, Excise, Customs, FTP, etc., and bring it to the notice of the Institute so that necessary
and Draft Business Reports on GST along with the support can be extended by our end in order to achieve
upcoming GST Law. allround development of the profession and the Institute.
Research and Journal Department Other Initiatives

The Institute was associated as the Knowledge Partner in i In a welcome move, BSNL inviting expression of
third edition of the PHD GLOBAL RAIL CONVENTION-2016 interest for Internal Audit is accepting Cost Audit
– ‘Indian Railways - Transforming into an Engine of Growth’ experience as part of statutory audit experience.
on April 13 2016 organized by the PHDCCI at New Delhi. This will benefit the participating CMAs.
Knowledge Report prepared by the Directorate on the i Bangalore chapter of the Institute organised
theme of the convention was highly acclaimed. Karnataka CMA Convention on 30th April 2016 at
Bangalore on the theme “Role of CMAs in Socio-
Tax Research Department Economic Growth”.
Taxation Committee has requested members for their
valuable suggestions on the draft rules on “Grant of Foreign I wish prosperity and happiness to members, students
Tax Credit” issued by CBDT. Committee has successfully and their families on the occasion ofGuru Rabindranath
completed yet another training program tailored for Tagore Jayanti and Budh Purnima. I also urge them to take
revenue officials. Taxation committee has come out with good care during the prevailing summer season.
the Guidance Note on application of the provisions
under Rule 6 & 7 of CENVAT Credit Rules 2004, which is With warm regards,
expected to provide necessary guidance to the members
of the profession. Ministry of Finance in its Press Release
dated 28thApril 2016 prescribed the framework of book
profit for the purpose of levy of MAT under section 115JB
of Income Tax Act, 1961 for Indian Accounting Standard
(Ind-AS) compliant companies. I request the members to (CMA P.V. Bhattad)
participate through the process of constructive discussion 1st May 2016
and facilitate Taxation Committee to make appropriate
representations before the authorities.
Initiatives by Members
I wish to inform that the following matters were brought
to the notice of the Institute by the members and Institute
offered wholehearted support to resolve the issues:
i My sincere appreciation to the Karnataka CMAs

Association on successfully appealing for the right
to Audit the Cooperative Societies of Karnataka
State, in the court;

From the Desk of
Dear Professional Colleague, roof, to deliberate the latest challenges faced by them in their
professional life is, being planned in the month of July 2016, that
Greetings!!! is, National Convention for Members in Industry.
One of the popular demands by the membership was Webinar
It gives me immense pleasure to reach you all through this by the Institute. Webinar has become a powerful tool to reach
communication. I am indeed grateful to the President, Vice- many members and it enables to overcome time and distance
President and all my Council Colleagues, for wholeheartedly barriers. As planned and decided we are pleased to organise more
supporting the initiatives of this new Committee in honing the and more webinars on wide range of topics and the sessions will
professional capabilities of the budding CMAs and the members be handled by experts from the respective domains. The first of
in Industry to serve the profession in a better way. such series of webinars was conducted on 19/4/2016, then on
April 2016 has been a crucial month in our calendar of events, 26-04-2016 and the response for this has been very positive and
as the budding CMAs are expecting more Companies to visit our now you can expect many webinars on latest topics regularly.
campus placement programmes scheduled during this month to We invite all the professional colleagues to share their thoughts
take first professional step into the corporate world. Preparing and views with us for taking the agenda of Campus Placement,
the final qualified students for the campus placement programme professional updating of knowledge to newer heights. You can
has been top of our agenda. We are extremely elated that the reach us through email: [email protected]
15 days Pre-Placement Orientation Programme conducted in 9 We also extend all the professional members warm wishes for
locations- Ahmedabad, Bhubaneshwar, Chennai, Delhi, Jaipur, a profitable financial year 2016-17.
Hyderabad, Kolkata, Jaipur, Mumbai and Vijayawada was highly We remain,
successful. 550 students who attended this programme would
reap the benefits when they face interviews in future. The
Chapters and Regional Councils in the above locations played a TEAM Members in Industry, Training & Placement, ICAI
pivotal role in grooming the students.
The response from the companies for the ensuing campus
placement programme has been encouraging and as you read this CMA H Padmanabhan
communication we had completed half of the campus placement Chairman, MI – T & P
program and I am happy to share that around 40% of CMAs
from Dec 15 final batch opted for placement have received offer Members
letters from 22 companies. I am confident that with the support CMA Dr. I Ashok
of all the four Regional Councils, when we will be completing then CMA Ashok B Nawal
campus placement programme on a highly successful note and CMA Avijit Goswami
many of the Dec 2015 pass outs would have found their future. CMA Dr. Jagan Mohan Rao
The contributions from the Members working in the industry CMA Vijender Sharma
for the growth of the Profession cannot be underestimated. In Dr. Baiju Ramachandran
order to sustain their contribution, many outreach programmes
covering latest topics impacting their day to day workings were Permanent Invitee
organized in 21 locations across the country. The feedback from CMA P V Bhattad, President, ICAI
these programmes is really encouraging and we plan more such CMA Manas Kumar Thakur, Vice President, ICAI
programmes in the coming months.
We are glad to share here that one mega-all India event to Secretary
bring all the members working in the Industry under one CMA L Gurumurthy, Senior Director, ICAI

Glimpses of
43rd SAFA Board Meeting
held at Mumbai on April 24,2016

ICAI-CMA SNAPSHOTS
CMA Vijender Sharma, Council Member and Chairman, Professional Development Committee- The Institute of Cost Accountants of
India- Knowledge Partner ; Mr. Yogesh Srivastav, Director, PHD Chamber; Mr Hemant Kumar, Hon’ble Member Mechanical & Ex.Officio
Secretary to Govt. of India, Railway Board, Ministry of Railways; H.E. Mr. Milan Hovorka ,Hon’ble Ambassador ,Embassy of the Czech
Republic; Dr Mahesh Gupta, President, PHD Chamber; Dr Jitendra Singh, Hon’ble Union Minister of State (IC)for Development of
North Eastern Region (DoNER); MoS of Science and Technology, Earth Sciences, Department of Atomic Energy, and Department of
Space; Ministry of Personnel, Public Grievances and Pensions, Prime Minister Office -Chief Guest; Mr. Anil Khaitan, Vice President,
PHD Chamber ;Mr Sandeep Aggarwal, Chairman, Railway Committee, PHD Chamber and Mr Saurabh Sanyal, Secretary General, PHD
Chamber, at the PHD Global Rail Convention-2016, releasing the ICAI-CMA & PHD Chamber Knowledge Study Series in New Delhi on
April 13 2016
Dignitaries on the dais at the two days Golden Jubilee Seminar, Speech by CMA Manas Kumar Thakur, Vice President of
held on March 18 and 19, 2016 by Ahmedabad Chapter Institute at the two days Golden Jubilee Seminar, held on March
organized on the theme ‘Challenges and Opportunities under 18 and 19, 2016 organized by Ahmedabad Chapter on the theme
Emerging India’. ‘Challenges and Opportunities under Emerging India’.
From Left: CMA Ashwin Dalwadi , Chairman, Golden Jubilee
Function, CMA Vinod Savalia, chairman of chapter, Dr.
Jaynarayan Vyas (Economist & Thinker), Chief Guest of
the seminar, CMA Manas Kumar Thakur, Vice President
of Institute, Shri Kartikay Sarabhai, Director Center for
Environment Education [CEE] the Guest of Honour, CMA P
H Desai, RCM & Vice Chairman, WIRC, CMA Manish Analkat,
Secretary of the chapter
Professional Development Meet held on March 24, 2016 organized by Bangalore Chapter
From Left: CMA Abhijeet S Jain, CMA P. Raju Iyer, Council Member, CMA R. Asokan, Advisor (Cost), MCA, CMA Geetha. S,
Chairperson, CMA A.K. Kapoor, Former Additional Chief Advisor (Cost), Ministry of Finance, CMA Y H Anegundi, Chapters’
Co-ordination Committee, SIRC and CMA N.R. Kaushik, Chairman, PD, Bangalore Chapter

ICAI-CMA SNAPSHOTS
CMA Vijendra Sharma, Council Member, addressing the workshop Dr. Kalyani Madhivanan, Former Vice Chancellor, Madurai
on ‘Impact of Changes in Service Tax, Excise, and Customs – Union Kamaraj University, Chief Guest, lighting the traditional lamp and
Budget, 2016’ held on April 21, 2016 at PHD Chamber, New Delhi inaugurated the ‘All India CMA Woman Summit – 2016’ organized
at Chennai by SIRC Women’s Wing on March 8, 2016.
CMA Manas Kumar Thakur, Vice President of the Institute Inaugural function of Kerala State Cost Convention organized
addressing the gathering at the ‘All India CMA Woman Summit – jointly by the Cochin Chapter and SIRC of the Institute on
2016’ organized at Chennai by SIRC Women’s Wing on March 8, March 28, 2016 on the theme ‘CMA – DNA of Make in India’s
2016 Cost Competitiveness. Seen are Vice President, Council Members,
Regional Council Members and other dignitaries at the program.
From left: CMA Kailash Gandhi, CMA L.D. Pawar, CMA P.H. Desai, CMA Niranjan Mishra, Chairman of Regional Council & Chapters
CMA Ashok B Nawal, Council Member, CMA Debasish Mitra, Co ordination Committee, addressing the group of representatives
Chairman, WIRC, CMA Shriram Mahankaliwar and CMA Harshad from NIRC at the “Regional Council and Chapters Co ordination
Deshpande during ‘Students Felicitation Programme’ organised by Meet” organised at Udaipur on 05th March 2016.
WIRC on April 9, 2016.

On March 10, 2016 the Institute jointly with Centre for Social Research organized a programme celebrating
Women’s Day based on the theme ‘Celebrating Womanhood: Enlightenment through Education and Empowerment
through Entrepreneurshi p’ at New Delhi. The Key Note Speaker was Dr. Ranjana Kumar, Director, Centre for
Social Research who deliberated on the topic ‘Economic Violence: Visible or Invisible’. Among other speakers,Dr.
Kiran Bedi,Former IPS officer briefed on the topic ‘Prevention of Crimes against Women – 6 P Model’,Ms. S M
Swathi,Executive Director,Bharatiya Mahila Bank shared on ‘Women Entrepreneurshi p- Role ofBanking Sector’,
CMA S.K Gupta, Head – Group Internal Audit and Company Secretary, Spentex Industries Limited deliberated
on the topic ‘Women in Board Rooms’,CMA B.B. Goyal,Advisor,ICWAI-MARF discussed on ‘Gender Issues and
Corporate Social Responsibility-Role played by CMAs’,CMA Manas Kumar Thakur,Vice President of the Institute
spoke on the topic ‘Role of Education in Women Empowerment through Entrepreneurshi p with specific reference
to CMAs’ and CMA Kaushik Banerjee, Secretary of the Institute detailed on the theme ‘Legal framework with
relation to Women at Workplace’. CMA Dr. I. Ashok,Council Member graced the occasion with his presence. The
programme was highly successful and an eye-opener to everyone on the concerned issues of women and their Role in
Socio – Economic Development.

Telecommunication services are globally recognised as one of the driving forces for
overall economic development of a nation. They are also one of the prime support
services needed for rapid growth and modernization of various sectors of the econ-
omy. Globalisation, privatisation and liberalisation accelerated all round reform
in the telecom sector of India. India have adopted a gradual approach to telecom
sector reform through selective privatization and managed competition in different
segments of the telecom market. The results of reform in telecommunications have
been much better and this is an important factor underlying India’s success in infor-
mation technology. Indian telecommunication sector is come out as one of the key
sectors that have put the economy on a revival path. Information and Communica-
tion Technology (ICT) benefits will spread among all and will promote innovation,
entrepreneurship and growth. India will emerge as a leading player in the virtual
world by having 700 million internet users of the 4.7 billion global users by 2025.

and in depth analysis of the research study.
3. The Reform Measures

The entire evolution of the telecom sector can be
classified into pre-liberalisation phase (1980-89), post-
liberalisation phase (1990-99) and post 2000 phase. In
the 1st phase a contract was signed in 1981 by the Indira
Gandhi Govt. with Alcatel CIT of France with the state
CMA Raghabendra Ray
owned telecom company (ITI) but the policy was dropped
Assistant Professor in Commerce
due to political resistance. In 1984 private sector entered
Shree Agrasen Mahavidyalaya
in telecommunications equipment manufacturing. Rajiv
Uttar Dinajpur
Gandhi Govt. invited Sam Pitroda, a US based NRI to set
up Centre for Development of Telematics (C-DOT) which
T
elecommunication services are globally manufactured electronic telephone exchanges in India for
recognised as one of the driving forces for overall the first time. Customer premise equipment manufacturing
economic development of a nation. They are also was delicensed, private operators were given licenses to
one of the prime support services needed for rapid growth operate public call offices and the overseas services were
and modernization of various sectors of the economy. corporatized for better focus and resource mobilization. In
Studies have shown that there is a positive correlation the second phase, the New Economic Policy 1991 set the
between Internet and Mobile services on GDP growth of framework for liberalisation, including the telecom sector.
a country. Globalisation, privatization and liberalisation The major reform process was started by delicensing
accelerated all round reform in the telecom sector of telecom equipment manufacturing in 1991. The reform
India. Like many other countries of the world India have measures taken after that are discussed below.
adopted a gradual approach to telecom sector reform 3.1 Private participation in service provision (1992)
through selective privatization and managed competition India introduced private participation in value-added
in different segments of the telecom market. As a result services in 1992 followed by opening up of cellular and
of reform, Indian telecommunication sector is come out basic services for local area to private competition.
as one of the key sectors that have put the economy 3.2. Formulation of National Telecom Policy, 1994
on a revival path. Indian Telecom Sector has grown The National Telecom Policy, 1994brought changes
exponentially because of sustainable measures taken in the area of ownership, service and regulation of
by the government and has become the second largest telecommunications infrastructure. The policy introduced
network in the world after China. the concept of “telecommunication for all” and its vision
was to expand the telecommunication facilities to all the
1. Objectives of the study villages in India.
a) To understand the reform measures taken in Indian 3.3. Separation of Policy and regulation 1997
C O V E R S TO RY
telecom Sector since 1991 The Telecom Regulatory Authority of India (TRAI) was
b) To examine the present scenario of the Telecom constituted in 1997 as an independent regulator in this
Sector sector. It reduced the interference of the government in
c) To find the future opportunities for growth of the deciding tariffs and policy making.
sector 3.4. Formulation of National Telecom Policy 1999
In order to remove high license fee and operational
2. Methodology bottlenecks, the National Telecom Policy, 1999 was
The research paper is based on the secondary data announced. It allowed the operators to migrate from fixed
sourced from Department of Telecommunications, license fee to revenue sharing regime and cost-oriented
Telephone Regulatory Authority of India, Ministry of telecom tariffs.
communication, reports from Government of India, 3.5. Restructuring of TRAI (2000)
Research Journals, Magazines, Articles and Media Reports, In 2000, Vajpayee Government constituted the
various websites & blogs. Looking into requirements of the Telecom Disputes Settlement and Appellate Tribunal
objectives of the study the research design employed for (TDSAT) through an amendment of the TRAI Act, 1997.
the study is of descriptive type which has greater accuracy The primary objective of setting up TDSAT by TRAI

Amendment Act, 2000 was to release TRAI from adjudicatory and to continue providing services as it would facilitate growth in
dispute settlement functions in order to strengthen regulatory teledensity.
framework. Any dispute involving parties like licensor, licensee, 3.11 Unification of Access Licenses (2003)
service provider and consumers are resolved by TDSAT. There are To resolve the conflict between CDMA and GSM operators the
scope for challenging any decision, order or direction of TRAI by disparity in licensing terms of providing WLL and cellular mobile
making an appeal to TDSAT. services were removed. DOT came out with Unification of Access
3.6. Private participation in National Long Distance (2000) Service Licenses (UASL) regime. Under this regime, operators
On the basis of new policy framework of NTP, 1999 National could provide either mobile or fixed line service using the same
Long Distance services were opened to the private sector w.e.f. license.
13th August, 2000. Indian registered companies having a net worth 3.12. Private participation in International Long Distance
of Rs. 20.5 crore and paid up equity of Rs. 2.5 crore were eligible (2004)
to apply. As there was no restriction on number of operators On the basis of new policy framework of NTP, 1999 International
competition increased and resulted in lowering of tariff. Long Distance services were opened for private participation
3.7. Corporatisation of BSNL (2000) in 2004. It is basically a network carriage service, providing
The Regulatory function of DOT is segregated by constituting international connectivity to the network operated by foreign
TRAI in 1997. In October, 1999 two new departments were carriers. Indian registered companies having a net worth of 2.5
created from Department of Telecommunications (DOT) crore are eligible to apply.
named Department of Telecommunication Services (DTS) and 3.13. Introducing Additional 2G Licenses (2008)
Department of Telecommunication Operation (DTO) to provide Taking into consideration the growth in mobile services, there
better services. In October, 2000 these two departments were were competing demands from existing operators for additional
corporatized into a single entity named Bharat Sanchar Nigam spectrum in addition to the start up and from new operators
Limited (BSNL) as a wholly owned government company under seeking to enter the sector. DOT followed Subscriber Linked
DOT. Criteria (SLC) for allocation of additional spectrum to existing
3.8. Introducing Fourth Cellular Operator (2001) operators on priority basis. SLC is the criteria that allocated
As a result of NTP, 1999 DOT introduced the fourth cellular additional spectrum based on number of subscribers in the
license by means of GSM standard through an auction, to initiate respective service area. But DOT had restricted the allocation of
greater competition. SLC for existing operators by increasing the qualifying number
3.9. Development of a framework for Universal Service of subscribers for getting additional spectrum. In January, 2008,
Obligation Fund(2002) DOT declared that additional players could get UASL licenses with
Government of India established a Universal Service Obligation start up spectrum based on availability.
Fund (USOF) in June 2002 to boost rural telephony. Various 3.14. Bringing in wireless Broadband (2010)
schemes have been launched by USOF for provision of telecom The growth of broadband sector in India accelerated from
services at affordable and reasonable prices in rural and remote the year 2005 but not at par with the estimates of government
areas of the country. Subsequently the scope was widened to and related agencies mainly due to bottlenecks in wired line
provide subsidy support to all telecom services including mobile technologies. This bottleneck was removed in 2010 when DOT
services, broadband connectivity and creating infrastructure like came up with a framework for 3G and Broadband Wireless Access
Optical Fiber Cable in rural and remote areas. (BWA) spectrum allocation in new bands. The auction of 3G
3.10. Allowing limited local mobility operators as Cellular wireless spectrum was announced in April, 2010 and 3G spectrum
Operators (2003) allocated to all private operators on 1st September, 2010.
As per NTP, 1999, there was no restriction on licensing to fixed 3.15. Formulation of National Telecom Policy, 2012
line operators. These operators are allowed to use Wireless in the Objectives of the National Telecom Policy, 2012 were as follows:
Local Loop (WLL) using Code Division Multiple Access (CDMA) l Provide secure, reliable, affordable and high quality
standard. Due to technological development, the distance telecommunication services to all citizens.
covered by WLL was increased significantly. These operators l Increase rural teledensity from current level of around 39 to
then started providing mobile services using CDMA called WLL 70 by the year 2017 and 100 by the year 2020.
with Limited Mobility (WLL-LM). It became cheaper to provide l Achieve 175 million broadband connections by the year
mobile services through CDMA due to disparity in license fee 2017 and 600 million by the year 2020 at minimum 2 mbps
and interconnection terms between CDMA and GSM (Global download speed and making available higher speeds of at
System for Mobile communication) operators. So conflict arose least 100 mbps on demand.
between these operators. Finally TDSAT allowed CDMA operators l Create a corpus to promote indigenous R&D, IPR creation,

COVE R S TO RY
entrepreneurship, manufacturing, commercialization and 2015. It has been prepared putting together various standards,
deployment of state-of-the-art telecom products and policy and regulatory requirements and approach for the
services during the 12th five year plan period. industry on how to look ahead to M2M. It is expected to work
l Provide preference to domestically manufactured as a reference document for all M2M eco-system partners and
telecommunication products. will enhance the policy goals of Make in India and Digital India.
l Strive to create One Nation-One License across services
and service areas. 4. Present Scenario of the Telecom Sector:
l Achieve One Nation-Full Mobile Number Portability and 4.1. Trends in Teledensity
work towards One Nation Free Roaming. Teledensity denotes the number of telephone per 100
l Reposition the mobile phone from a mere communication populations. It is an indicator of telecom penetration in the
device to an instrument of empowerment. country. The total, urban and rural teledensity as of 30 th
l Make available additional 300 MHz spectrum for IMT September, 2015 were 80.98, 153.49 and 48.76 respectively,
services by the year 2017 and another 200 MHz by 2020. showing a phenomenal growth over last 15 years. A comparison
l Recognize telecom as Infrastructure Sector to realise true since 1996 is shown in Figure-1.
potential of ICT for development.
l Adoption of green policy in telecom.
l Achieve substantial transition to new Internet Protocol
Version-6 (IPv-6).
3.16. Universalizing broadband access (2012)
The optical fiber has reached mainly to state capitals,
districts and blocks. To connect all 2.5 lakh Gram Panchayats
in the country, government approved a project called “National
Optical Fiber Network (NOFN)”. Government of India used NOFN
as a strategy to universalize broadband access. It envisaged Figure 1
that NOFN would transform governance, service delivery and
unleash local innovation capacity through rural broadband. Non- 4.2. Wire line Vs Wireless
discriminatory access to the network will be provided to all the Wireless voice and data services continued to grow. But so
telecom service providers like mobile, internet and cable TV in far as high speed data services are concerned, landline provided
rural areas. The project is likely to be completed by 31.12.2016. in remarkable support. The number of landline telephones are 25.95
a phased manner as follows: million and wireless telephones has grown to 996.66 million at
Phase I 50000 Gram Panchayat by 31.03.2015 the end of September, 2015. As a result the share of wireless
Phase II Another 100000 gram Panchayats by 31.03.2016 telephones increased to 97.46 per cent of total services. A
Phase III Remaining 100000 Gram Panchayats by 31.12.2016 comparison is shown since 1997 in Figure-2
3.17. Telecommunication Standards Development Society,
India(TSDSI) (2014)
TSDSI was established on 7th January, 2014 as a society at
New Delhi. It acts as telecommunication standards development
organisation with an objective to develop, promote and maintain
standardised solutions for India-specific requirements. It
intends to contribute its work to the global telecommunication
standardisation process and also acts as a catalyst for the local
development of design and manufacturing expertise in the sub
continent. Figure 2
3.18. Roll out of 4G services (2014): 4.3. Broadband
Some private sector companies like Reliance, Bharti, etc. It is necessary to increase broadband connectivity for the
introduced 4G services in 2014. The state-owned MTNL cannot knowledge based society to grow quickly and for reaping
introduce 4G before 2017 because they do not hold liberalized consequent economic benefits. Broadband penetration and
spectrum. Though, BSNL is planned to rollout 4G services in 2016. adoption in the country is unsatisfactory. In this backdrop
3.19. Machine to Machine (M2M) Communication (2015) TRAI carried out a suo moto consultation process on the issue
A “National Telecom M2M Roadmap” was released on 12th May, on “Delivering Broadband Quickly”. Figure-3 shows number

broadband connections since 2004-05. NLD tariff became cheaper like local calls. The International
Long Distance (ILD) tariff also showed similar reduction. Mobile
tariff in India are the second lowest (US $ 1.6 per month) in the
world after Bangladesh as against world average prepaid tariff
of US $ 10.1 per month. Low tariff is an innovation driven by
intense competition, low purchasing power and strict regulatory
environment. However, there was increase in tariffs in the recent
years. There was also increased usage of data communication
which was relatively more expensive. As per the telecom Tariff
Order (TTO) Sixtieth Amendment, 2015, with effect from 1st May,
Figure 3 2015, following changes are brought in the tariff regime for
4.4. Public Vs Private Operators national roaming services.
In Indian Telecom sector the private sector is dominating. The (Table-1) Telecom Tariff
total number of telephones increased to 10226.10 lakh for the Ceiling tariff as Ceiling tariff as
period ended 30th September, 2015 mainly due to increase in the Items per TTO(Fifty Fifth per TTO(Sixtieth
private sector network. There is a continuous rise in the number Amendment), 2013 Amendment), 2015
of telephones of private sector operators. The total number of Outgoing Re. 1.00 per minute Re. 0.80 per minute
telephones of the private sector operators increased to 9201.44 local voice
lakh, whereas number of telephones of public sector stood at call
1024.66 lakh for the period ended 30th September, 2015. As a Outgoing Rs. 1.50 per minute Rs. 1.15 per minute
result, share of private sector increased to 89.98 percent and long distance
share of public sector stood 10.02 per cent during the same (inter-circle)
voice call
period. The growth of PSUs and Private Sector and Total since
1997 is shown in Figure-4. Incoming Re. 0.75 per minute Re. 0.45 per minute
voice call
Outgoing Re. 1.00 per SMS Re. 0.25 per SMS
local SMSl
Outgoing Rs. 1.50 per SMS Re. 0.38 per SMS
long distance
(inter-circle)
SMS
4.7. Full Mobile Number Portability

Mobile Number Portability allows any subscriber to change
his service provider without changing his mobile phone number.
With the announcement of guidelines for MNP, telecom service
Figure 4 providers will be forced to improve quality of their service to
4.5. Reliability avoid losing subscribers. National Telecom Policy 2012 envisages
Objective of DOT is to provide secure, reliable, affordable achieving of One Nation-Full Mobile Number Portability in
and high quality services anytime anywhere for an accelerated the country. Total number of porting requests at the end of
inclusive socio economic development. The reliability of calls November, 2015 were 186.69 million (approx.)
improved on various parameters such as call completion rates, 4.8. Value Added Services(VAS)
network downtime, etc. On the issue of call drop TRAI mandated Value added services in mobile phones include SMS, menu
to credit Re. 1.00 per dropped call to the account of the consumer based services, downloading of music or ringtones, mobile TV,
upto a maximum of 3 calls per day with effect from 01.01.2016. videos, streaming, etc. Before 2008, maximum revenue came
4.6. Tariff from SMS. Presently, VAS also includes m-banking, m-education,
Local call tariff of mobile phones in 1990’s was Rs. 16.40 m-governance, m-health, m-agriculture, etc. Recent trends
per minute by early 2000. National Long Distance (NLD) tariff show that m-banking, m-education, m-governance, m-health,
had reduced from Rs 34.50 per minute to under Re. 1.00 per m-agriculture, etc, has assumed significance due to rapid growth
minute for distance over 100 km during the same period. So in wireless subscriber base. VAS other than SMS is gaining

COVE R S TO RY
importance owing to availability of cheaper handsets, smart service providers are shown in Figure- 3.
phones and consumer education. Consequently, the mobile
phones have transferred into a persuasive medium to deliver
information services spanning various usage areas such as
governance, commerce, agriculture, education and health. Thus
digital empowerment is playing an instrumental role in bringing
about empowerment to all strata of society. It is further expected
that, non-SMS VAS would became a dominant contributor to VAS
revenue.
4.9. Creation of Large Companies
Department of Telecommunications was the only agency to
provide telecom services in the country. In 1986 DOT created
Figure 5
Mahanagar Telecom Nigam Ltd (MTNL), a wholly owned Source: TRAI, Telecom Services Performance Indicators Report; July-Sept
Government Company and Videsh Sanchar Nigam Ltd. (VSNL) 2015
to provide services in metros of Mumbai, Delhi and international 4.10. Earnings to the Government
segments respectively. The National Telecom Policies 1994 and It is definitely said that the growth in telecom sector had
1999 allowed private entry into the telecom sector. Large telecom increased the revenues for the service providers. On the other
companies came out like Bharti Airtel, Reliance Communication hand, it significantly added to the earnings of the government. Its
Ltd., Vodafone India, Idea Cellular Ltd., etc. On 1st October, 2000 contribution to the Gross Domestic Product (GDP) had increased
Government corporatized the Department of Telecom Operation from nearly 1.3% in 1995-96 to 2.0% in 2014-15 (Table-2). It had
and Department of Telecom Services by forming Bharat Sanchar reached a peak of 2.9% in 2007-08 in an economy that was
Nigam Limited (BSNL) to perform the functions of DOT all over growing at 6 -7%. The share had declined after that due to the
India excluding Delhi and Mumbai. The market share of different faster growing economy.
(Table-2): Share of Telecom Sector in India’s GDP (Rs. ’000 crore)

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
GDP at current prices 3242 3693 4294 4987 5630 6478 7784 8736 9951 11273 12488
Total Telecom 72 86 105 144 152 158 172 195 212 233 255
Revenue
Contribution of 2.2 2.3 2.4 2.9 2.7 2.4 2.2 2.2 2.1 2.2 2.0
Telecom Sector to
GDP (%)
4.11. Foreign Direct Investment (FDI) 12 to 2015-16 (Nov) are Singapore(8.6%), Mauritious(11.5%),
Since telecom is a highly capital intensive sector and need huge Netherlands(0.3%), US(2%) and Japan(0.1%). Cumulative FDI
investments for its expansion, FDI is very much essential for the inflows is shown in Table-3
sector. It is one of the important sources to meet the requirement Table-3: FDI Inflows
of huge funds for rapid network expansion. The FDI policy
provides an investor-friendly environment for the growth of the Year ending March, 31st Cumulative FDI Inflows (in US million $)
sector. Through the invitation of FDI in this sector the companies 1991-99 1212
can access foreign capital markets to serve the country and
2000-04 1326
brings in affordable telecom services. From the year 2005, the FDI
2004-05 1455
limit is increased from 49% to 74%. FDI limit is raised from 74%
to 100% for manufacturing of telecom equipment and various 2005-06 2079
telecom services. Increasing FDI limit in the sector would allow 2006-07 2557
telecom players to raise fresh capital for growth and development 2007-08 3818
of telecom infrastructure. Actual inflow of FDI in telecom sector 2008-09 6376
from April, 1991 to December, 2015 is Rs. 18130 million US $. FDI
2009-10 8931
inflows in telecom sector from top host countries from 2011-

in telecommunications have been much better and this is an
Year ending March, 31st Cumulative FDI Inflows (in US million $)
important factor underlying India’s success in information
2010-11 10589 technology. Information and Communication Technology
2011-12 12552 (ICT) benefits will spread among all, the rich and the poor, the
young and the old, the men and the women, the organised and
2012-13 12856
unorganized and the government and the governed, and will
2013-14 14163
promote innovation, entrepreneurship and growth. An expanding
2014-15 17058 domestic market will deepen the synergy between the domestic
2015-16(Dec’15) 18130 and the export market and strengthen India’s presence in the
Source: DOT, Annual Report 2014-15 and DIPP website. high value segment of the global trade and investment. It is worth
4.12. Employment mentioning that in September, 2014 India participated in Asia
As per a study in 2011, direct employment under the service Pacific Telecommunity (APT) Ministerial Conference and elected
providers was expected to be 400000, of which 280000 was as a member of the International Telecommunication Union (ITU)
from the government. Telecom Skill Development Group (Telecom Governing Council for the period 2015-18. We really feel proud
Sector Skill Council) conducted an in-house study and submitted when we come to know that in this conference India strives not
its assessment to National Planning Committee, NITI Aayog. It only to maintain safe and secure society through ICT, but also
states that the telecom industry is expected to generate 7 lakh maintain an enabling and sustainable ecosystem for an innovative
new job opportunities in the next five years. economy. MA
5. Opportunities for future growth References

India will emerge as a leading player in the virtual world by 1. Ahluwalia, Montek. S, Paper on “Economic Reforms in India since
having 700 million internet users of the 4.7 billion global users by 1991” published in Journal of Economic Perspectives, Summer 2002.
2025. With the government’s favourable regulation policies and 2. Annual Reports of Department of Telecommunications, Govt. of
4G services hitting the market, more and more growth is expected India
in the Indian telecommunication sector in the next few years. 3. Annual Reports of Telecom Regulatory Authority of India
The full extent of impact from Innovation of mobile phone and 4. Bhattacharya, Manas. DDG (Finance) DOT, Telecom Sector in India:
internet on business and consumers is probably still to come. For Vision 2020, Background Paper submitted to the Committee on India:
instance, e-commerce is still in relative infancy and is expected Vision 2020.
to boom in coming years as old economy firms reorient their 6. Corporate Catalyst (India) Pvt. Ltd. A Brief Report on Telecom Sector
business processes around it. Similarly the true potential of a in India, January 2015,
mobile phone, as an integrated communications, entertainment 7. Economic Survey 2015-16
and positioning device, is only beginning to be realized. DOT has 8. Jain, Rekha and G. Raghuram, paper on “Lessons of reforms in
planned to frame a separate exit policy for the country’s telecom Telecom Sector” IIM Ahmedabad Research Publication (W.P.No. 2015-
sector that will allow companies to leave the business without 03-22) March 2015.
losing out on the value of the assets. The move is being seen as 9. TRAI, Telecom Services Performance Indicators Reports of different
part of GOI’s endeavour to make the country’s telecom sector quarters
investor friendly and enhance the ease of doing business in 10. TRAI Activity Reports
India. Also, with developments in this sector, services such as 11. Wikipedia, the free encyclopedia
security and surveillance, remote monitoring of ATM machines,
home automation, traffic management, retail, logistics and grid
energy could eventually facilitate optimization of resources. If
past trends were any guide, it would be reasonable to hope that
by 2020 India would complete transition into digital switching
and transmission, VoIP broadband and 3G.
6. Conclusion
The vision of telecom depends on the vision of information
technology in future. On the other hand, in an information
society telecom will be the means of future expansion of IT. So
they are complementary to each other. The results of reform [email protected]

Universal Service
Obligation Fund
in Telecom Industry
grant various types of subsidy. For the last financial year

a sum of Rs. 2,27,387.56 crores was proposed as subsidy
on food, petroleum and fertilizers. Telecom is not an
exception to the subsidy scheme.
Telecom industry
In India the telecom service traveled at various stages.
CMA Dr. M. Govindarajan The liberalization policy of the Government from 1991
Sr. Accounts Officer paved the way for the rapid development of telecom
BSNL, Madurai industry in India. Many private operators entered into
the industry. The Government has also converted the
Department into Public Sector Units. The National Telecom
Subsidy Policy of 1994, 1999 and 2012 urged the rapid development
The term ‘subsidy’ is derived from the Latin word of the telecom industry. The target fixed has more or less
‘subsidium’ which means coming assistance from behind. achieved by the industry. The broadband policy initiated
In business context, this term is defined as a financial the use of internet abundantly by the people in India. The
benefit provided to a business, industry or sector by a consumers are able to get the services at the lesser price
C O V E R S TO RY
Government to achieve a specific economic or political while the price of goods and services in our country has
goal. The subsidy is generally given to lessen the burden reached the peak that the normal consumers could not
and also considering the public interest. The various types able to purchase the goods and avail the services.
of subsidies are-
l Production subsidy; Subsidy in Telecom industry
l Consumer subsidy; The telecommunication services to the people living
l Export subsidy; in remote and rural areas of the country in which the
l Employment subsidy; infrastructure of the communication had not developed
l Tax subsidy; and because of the following reasons-
l Environmental externalities. l Remoteness of areas;
Subsidies can either be broad or narrow, legal or illegal, l Low income habitants;
ethical or unethical. l Sparse population;
l Absence of supportive infrastructure;
Subsidy in India l Insurgency;
In India Central Government as well as Stat Governments l Difficult terrain.

COVE R S TO RY
Because of the above reasons ICT services cannot be provided The USO fund is also planning to support initiatives on Research
to them. Further the telecom operators hesitate to establish and development front. The fund also support submarine
services in these areas because of high involvement for the connectivity for islands like the Andaman and Lakshadweep as
infrastructure and the low income generation because of less well as provide broadband connectivity on satellite for remote
population. The Government’s social obligation is to grant region.
services to each and every citizen of the country irrespective of
socio-economic considerations and geographical location. The Scope of the Fund
Government is also to bridge the rural-urban digital divide. The financial support from the fund shall be provided to
To overcome these challenges the Universal Service Support meet the net cost of providing the specified Universal Service
Policy came into effect from 01.04.2002. The Indian Telegraph Obligation as per the procedure specified by the Administrator
(Amendment) act, 2003 gives statutory status to Universal from time to time and the period for which such support shall
Service Obligation Fund (USO). The said Fund was set up in be provided and the services covered shall be governed by an
2002 to provide access to telephony services to rural India agreement entered into with the Universal Service Provider.
at affordable prices. The corpus of the fund is raised by the
Government through a universal levy (USL) fixed at 5% of the Release of Funds to Universal Service Providers
Adjusted Gross Revenue of telecom operators. The USOF is The fund shall be released to the Universal Service Provider
headed by the Administrator who is empowered to formulate in a manner and at such intervals as may be specified in the
procedures for implementation of USO and disbursement of agreement. The Universal Service levy is presently 5% of the
funds from the USOF. His office functions have been attached Adjusted Gross Revenue of all telecom service providers except
to the Department of Telecom, Ministry of Communications and the pure value added service providers like internet, voice mail,
Information Technology. The USOF was established with the email service providers etc., In addition the Central Government
fundamental objective of providing access to ‘basic’ services. may also give grants and loans. The annual revenue share licence
Subsequently the Indian Telegraph Act, 1885 was amended by fee shall be reduced to the extent of reduction in contribution
the Indian Telegraph (Amendment) Act, 2006 to enable provision towards USOF levy if the licencee in service area(s) meets the
of all types of telegraph services. prescribed qualification. The balance to the credit of the fund will
The Indian Telegraph Rules have been amended to not lapse at the end of the financial years. Credits to the funds
provide subsidy support to eligible operators for operators’ shall be through Parliamentary approvals.
sustainability of rural wire line household telephones installed Since its inception the USO scheme has made significant
prior to 01.04.2002 for a period of 3 years subject to a ceiling progress in promoting rural telephony. As of December 2009
of Rs.2000 crores per annum. The amendment widened the financial support was being provided for operation and
scope of the USO Fund to include all telecom services including maintenance for about 570000 existing VPTs, including the VPTs
shared infrastructure, mobile services, broadband and optic fiber under the Bharat Nirman Scheme. The Bharat Nirman initiative of
networks. Part X, dealing with Universal Service Obligation Fund the government has been designed to provide subsidy support for
was inserted in the Indian Telegraph Rules, 1951 after Rule 522. provision VPTs in all the uncovered villages of the country (66822
Rule 523(m) defines the terms ‘Universal Service Obligation’ as according to 1991 census) excluding those that have a population
the obligation to provide access to basic telegraphs services to of less than 100 or lie in deep forest and insurgency-prone areas.
people in the rural and remote areas at affordable and reasonable According to the scheme, this subsidy will be provided for a
prices. Rule 523(n) defines the terms ‘Universal Service Provider’ period of five years from the date of installation of the VPTs.
as the person who has entered into an agreement with the With respect of wireless services, the USO fund has launched
Administrator for the purpose of implementation of Universal a scheme to provide subsidies to private telecom operators for
Service Obligation. setting up and managing 7436 towers in 500 districts across the
Till 2006, the fund was used to subsidize only fixed line country and to roll out their services in the specified remote
services including the provisioning and maintenance of VPTs, rural regions, which were previously not connected. To further
Rural Community Phones (RCPs) and household telephones in encourage operators to roll out infrastructure in these areas, the
rural areas and the replacement Multi Access Radio Relay (MARR) Government has been promoting infrastructure sharing.
VPTs installed before April 2006. From November 2006 the The first phase of the mobile infrastructure has been
Government extended the scope of the fund to subsidize wireless completed. There has been a capacity creation of about 24 million
and broadband services. The fund is also started encouraging lines, which can also be used for providing wireless broadband
and supporting the adoption of innovative solution to overcome services. The Government is commissioning base transreceiver
constraints such as lack of adequate power supply. stations (BTSs) so that mobile services could be started in a

phased manner. In the second phase bout 11000 towers were according to Telecom Subscription data, released by Telecom
installed in the uncovered areas of the country. While the fund Regulatory Authority of India is 49.53% as compared to urban
was fairly ambitious in fixing the commissioning time for setting tele density 147.12%.
up towers as one year in the first phase of the scheme there were The Policy indicates that the Government is to undertake the
time overturns of at least three to four months in most cases. As periodical review of methodology adopted for utilizing the USO
a result the timeline for completion has been extended to two Fund and benchmarking the same against the best practices
years. followed in other countries and to provide continued support
from the USO fund for telecom service including converged
National Telecom Policy, 2012 communication services in commercially unviable rural and
The National Telecom Policy, 2012 has the vision ‘Broadband remote areas.
on demand’ and envisage leveraging telecom infrastructure to
enable all citizens and business, both in rural and urban areas Utilization of USO Fund
to participate in the internet and web economy thereby ensuring The collection of funds is on the increase since the number of
equitable and inclusive development across the Nation. In respect operators is in the increase and the revenue is on the increase.
of rural telephones, the objective of the National Telecom Policy, The following table shows the details of collection, fund allocated,
2012 is to increase rural density to 70 by the year 2017 and 100 funds disbursed, reimbursements and balance of the fund
by the year 2020. The rural density in the year 2009 is 21% and available from the year 2002 – 03 to the current financial year.
39% in the year 2012. As on 31.12.2015 the rural teledensity,
Table – 1 : Statement showing the collection, funds allocated, funds disbursed, reimbursements and balance
(Rs. In crores)
Reimbursement of LF
Financial year UAL Collections* Funds allocated Funds disbursed Balance
and spectrum charges
2002-03 1653.61 300.00 300.00 2300.00 -946.39
2003-04 2143.22 200.00 200.00 2300.00 -356.78
2004-05 3457.73 1314.59 1314.59 1765.68 377.46
2005-06 3215.13 1766.85 1766.85 582.96 865.32
2006-07 3940.73 1500.00 1500.00 0 2440.73
2007-08 5405.80 1290.00 1290.00 0 4115.80
2008-09 5515.14 1600.00 1600.00 0 3915.14
2009-10 5778.00 2400.00 2400.00 0 3378.00
2010-11 6114.56 3100.00 3100.00 0 3014.56
2011-12 6723.57 1687.96 1687.96 0 5035.61
2012-13 6735.46 625.00 625.00 0 6110.46
2013-14 6735.46 2163.45 2163.45 0 5732.94
2014-15 7538.70 2086.98 2086.98 0 5451.72
2015-16
4001.99 1302.46 1302.46 0 2699.53
(Provisional)
TOTAL 70120.03 21337.29 21337.29 6948.64 41834.10
l Booked figures as per DoT accounts.

Source: www.usof.gov.in

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As per Ministry of Finance letter no F. 1 (20)-B (AC)/2007 The above table shows that Maharastra state gets the higher
dated 04.06.2008 the reimbursement of licence fees and distribution from the Fund. Next is the Rajasthan State, Andhra
spectrum charges to BSNL amounting to Rs 6948.64 crore over Pradesh, Uttar Pradesh – East, Gujarat, Karnataka and Kerala.
the period 2002-03 to 2005-06 for fulfilling rural obligation is The following table shows the distribution of USO Fund to the
required to be taken into account for arriving at the available service providers up to the year 2014 – 15:
balance. Still Rs.41834.10 crores is yet to be disbursed by the
Government from the USO Fund. Table – 3 : Universal Service Provider wise share in Total subsidy
The USO Fund is distributed to all the service providers disbursal
getting Universal Access Lines. The following table shows
Name of Company Disbursed amount percentage
the State wise disbursements of the USO Fund up to the year
2014 – 15: BSNL 15823 78.97%
Table – 2 : Service Areawsie Share in Total subsidy disbursed BBNL 2271 11.33%
chart up to 2014 - 15
RIL 751 3.75%
State Disbursed amount (in crores) Percentage TATA 723 3.61%
TTML 317 1.58%
Andhra Pradesh 800.8 4%
RCIL 25 0.12%
Assam 215.02 1%
GTL 37 0.18%
Bihar 414.84 2%
KEC 39 0.19%
Chhattisgarh 287.67 1%
REST 13.21 0.07%
Gujarat 663.74 3%
DWL 9 0.05%
Haryana 185.01 1% VECL 9 0.05%
Himachal Pradesh 267.65 1% VESL 18 0.10%
Jammu & Kashmir 95.2 0.34% 20035.21 100.00%
Jharkhand 86.27 0.33%
The above table indicates that BSNL, the State owned Telecom
Karnataka 666.4 3%
Company is receiving the highest contribution from the USO
Kerala 521.96 3% Fund.
Madhya Pradesh 833.37 4%
Maharashtra 1348.17 7%
Universal service is an economic, legal and
North East - I 110.4 1%
business term used mostly in regulated indus-
North East - II 81.32 0.33% tries. It refers to the practice of providing a
Orissa 410.29 2% baseline level of services to every resident of a
country. Universal service was widely adopted
Punjab 320.58 2%
in legislation in Europe beginning in the 1980s
Rajasthan 796.14 4% and 1990s. Most countries fund their USO
Tamil Nadu 360.25 2% by requiring the incumbent operator to be the
designated USO provider or USP. USPs often
Uttaranchal 161.35 1%
previously held a legal monopoly protection.
Uttar Pradesh - East 596.74 3% The USO is thus funded by rates/tariffs, and
Uttar Pradesh -West 264.92 1%
also by scale and scope economies. In this
article the subsidy given to Telecom Industry in
West Bengal 179.75 1% the form of Universal Service Obligation Fund
USOF Headquarters 10367.37 52% is discussed in detail.
20035.21 100%

The following table shows the disbursement of USO Fund scheme wise from the year 2009 – 10 to 2015 – 16:
Table – 4 : Subsidy Disbursement
Scheme wise Funds Provided By The USO Fund From 2009 - 10 To 2015-16
SCHEME 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*
LWE 0 0 0 0 0 5965.06 0
MARR-A 1481.3 1321.8 1385.58 402.21 37.05 -4.79 0.3
MARR-B 527.83 135.46 4.23 0.02 9.64 -0.43 0
MOB-I 510.44 916.78 870.83 947.49 644.05 99.74 9.88
MOB-VAS-SS 0 0 0 0 4.14 3.53 1.97
New VPT -1 368.76 248.28 133.48 34.34 11.87 0 0
New VPT -2 384.01 207.27 205.73 82.57 220.39 63.55 5.66
NOFN 0 0 0 4250 5140 13518.65 3190
OFC 0 0 0 7.71 0 314.04 0
OFC NE-1 0 0 0 0 0 0 39.46
RCP 77.38 16.47 -7.58 -1.3 0.06 0 0
RDEL-A 1669.48 306.76 55.05 -1.16 2.81 2.63 8.29
RDEL-B 177.17 -39.72 0.84 -0.01 0.34 0 0
RDEL-D 0 0 0 0 0 0 0
RDEL-P 13776.09 26017.71 12706.21 0 15000 0 0
RDEL-X 3742.93 970.51 523.74 -1.34 -65.1 100.35 -2.97
SMCF 0 0 5.28 22.16 19.51 6.8 2.72
VPT-OPEX 858.88 250.47 86.06 0.71 4.79 -4.7 0
Wire line BB 425.73 648.21 910.17 706.6 604.77 805.37 284.36
Total 24000 31000 16879.62 6450 21634.32 20869.8 3539.67

*Upto 30.09.15
Source: telenet journal November 2015.
LWE - Left Wing Extremist Scheme; MARR - Multiple Access The DoT came under the scanner of CAG. The CAG criticized for
Radio Relay; DoT for not utilizing the funds.
VAS - SS -Value Added Service Sanchar Shakti; VPT - Village
Panchayat Telephone; Monitoring Mechanism
NOFN - National Optical Fiber Network; OFC - Optical Fiber The Department of Telecom, the administrator of USO fund
Cable; incorporated the following agreements with the Telecom operators
RDEL - Rural household direct exchange lines; SMCF - Solar for the purpose of monitoring and control of the activities:
Mobile Charging Facility l Agreement terms and conditions to guarantee adherence
OPEX - Operating Expenses; BB - Broadband to Quality of Services;
l Self certification through an affidavit by Service Providers;
The most crucial issue pertains to the revamping of the l Deductions for service interruptions;
disbursement mechanism for the USO fund to make it more l Roll out clause;
efficient, since a large part of these funds remains unutilized. l Liquidated damages;

COVE R S TO RY
l Post payment sample verification; Achievement

l Physical inspection; The rural broadband segment is witnessing increasing interest
l Annual auditor’s certificate; from operators which have been helped by the extension of USO
l Recovery of overpayments with penal interest. fund’s scope to cover broadband services. As on 31.12.2015, 16.51
The Department of Telecom appointed Controller of million wire lines broadband connections are provided and 120.02
Communication Accounts (CCA) across 22 service areas. The million wireless broadband connections are provided all over the
CCA has been delegated the power to distribute the fund and country. The following table will show the subscription data as
verify the claims. CCAs are assisting Department of Telecom on 31.12.2015 in respect of landline and mobile connections
in monitoring of the field level implementation of the USO provided to urban and rural areas and also the teledensity:
agreements. They also liaise with State Governments and local
authorities for this purpose.
Table – 5 : Telecom Subscription Data as on 31.12.2015 (inmillion)
Details Wireless – Mobile Wireline - Landline Total connections
Urban 579.67 20.99 600.66
Rural 431.22 4.54 435.75
Total 1010.89 25.52. 1036.41

Teledensity
Urban 147.12 5.33 152.45
Rural 49.53 0.52 49.94
Source: www.trai.gov.in
The National Telecom Policy, 2012 fixed the target of rural ensuring benefits to rural customs.
teledensity 70 by the year 2017 and 100% by the year 202. As
on 2015 the rural teledensity is 49.94. It is evident that a large Conclusion
section of the rural population remains unserved. In order to There is a need to make these funds available to not just
reduce the disparity between the rural and urban areas and for telecom operators but also other stakeholders in the rural
improve the telecom infrastructure, the Government has been telecom value chain. Although the fund is working on several
implementing several projects having rural focus. The projects schemes and projects to facilitate rural telephone, without the
have been rather slow and the deadlines fixed for the targets have co-ordinated effort of the telecom industry it is going to be
been missed. The slow disbursal of funds, delays in procuring key difficult to achieve complete connectivity and infrastructure
equipment and the lack of participation from private players are development in remote parts of the country. The Government
some other major issues have been impeding project execution. believes that the telecom sector can serve as a medium to bridge
Due to non proper utilization of USO fund, the TRAI have the rural-urban divide. With the mobile phone penetrating
requested the Government to gradually reduce the levy on remote corners of the country, the Government expects it to be
telecom service providers. TRAI also stated that relieving the future vehicle for taking banking services, education, health
operators from paying high fees would ensure the availability of care and other facilities in rural area. The Government also needs
more funds, which in turn would facilitate the financing of rural to lower the USO Fund levy in telecom operation to ensure higher
work net expansion. TRAI has recommended reducing the USO investments in rural areas. MA
Fund levy from 5% of AGR to 3%.
As of March 2015, 20000 gram panchayats had been
connected through broadband as against the target of 50000
gram panchayats. The Government’s move to expedite broadband
network roll outs under Bharat Net is in the right direction, its
execution within the proposed timeline will be imperative for [email protected]

A Case Study of Indian
Telecom Industry
CMA Dr. Batani Raghavendra Rao

Professor and HoD, Finance & Accounting
CMS B School, Jain University, Bengaluru
Telecommunication has witnessed an

exponential growth in India in the last
two decades. It is a critical infrastructure
constituent and plays a significant role in a
country like India, where the infrastructure
is still an issue. It contributes to GDP, tax C O V E R S TO RY
revenue, employment, digitisation, bridging
the divide between urban and rural, data
revolution, logistics and supply chain
management, e-commerce, e-governance,
payment banksand the list goes on. The
present case study dwells on the strategic
analysis of telecom industry in India. It has
four sections. The first section deals with
overview of the Indian telecom industry.
The second section takes through the
growth drivers and challenges of Indian
telecom industry. The third section deals
with revenue, costs and key performance
indicators (KPIs)of the industry. The fourth
and the last section sums up the study.

COVE R S TO RY
Section 1 enactments that followed were New Telecom Policy 1999,

1. Overview of Indian Telecom Industry Cable Television Network (Regulation) Act 1995, Broadband
1.1 Structure of Indian Telecom Industry Policy 2004 and National Telecom Policy 2012. The brief
Indian telecom network is the second largest in the world account of telecom reforms in India is given in the Table 1.1.
after China1. Telecom industry has witnessed a sea change in the The important regulating authorities/agencies are TRAI3,
last two decades. The industry has many players – government, DoT4 and TDSAT5.
private and foreign telecom companies. The competition amongst
the players is intense. The structure of the industry is provided Table 1.1 Reforms in Telecom Sector
in Figure 1.1.
h Telecom equipment manufacturing was completely
deregulated in 1991.
Figure 1.1 h Value added services including cellular phone services
thrown open to private sector in 1992.
Indian Telecom Industry
h National Telecom Policy (NTP) was announced in 1994
allowing private sector participation in basic services.
Public Sector Private Sector h Telecom Regulatory Authority of India (TRAI) was set up
in 1997.
rr h A new policy for Internet Service Providers (ISPs) was
MTNL BSNL Indian Companies
Foreign Invested announced in 1998 opening the area to private sector
Companies
providers. The policy was promotional in nature. No
licence fee is to be paid by the ISPs for the first five years
and then it is Re 1 per annum.
h A new policy called New Telecom Policy (NTP), 1999 was
Source: D&B Research
announced replacing the 1994 policy.
Additional Note to Figure 1.1: h Migration of the existing licencees from the regime of
a. Videsh Sanchar Nigam Limited (VSNL) was established fixed licence fee to a new regime of revenue share was
in 1986 to provide international long distance (ILD) services. permitted in October, 1999.
Subsequently, VSNL was privatised in February 2002 with h The regulatory mechanism has been further strengthened
the sale of a strategic stake. through the TRAI (Amendment) Act, 2000. The Act
b. MTNL was established to take care of Mumbai and Delhi provides for establishment of a separate dispute
and BSNL was set up to take care the rest of India. settlement mechanism called Telecom Dispute Settlement
and Appellate Tribunal.
1.2 Telecom service providers h ISPs permitted to set up sub-marine cable landing stations
The major Indian private sector listed telecom companies for international gateways for Internet.
are Bharti Airtel, Idea, Reliance Communications and Tata h National Long Distance Service was opened for
Communications. Aircelis an Indian but not listed telecom competition in Aug. 2000.
company and Vodafone is a foreign telecom company. MTNL h Corporatization of DoT into public company called Bharat
is a PSU listed telecom company. BSNL is a fully government Sanchar Nigam Limited from 1st October 2000 approved.
owned telecom company. The list of telecom service providers h International Long Distance Services to be opened for
is provided in Appendix 1. The list of services providers competition from 1st April 2002 ending monopoly of
across the services is available on TRAI website2. The various Videsh Sanchar Nigam Limited
services offered by telecom companies are provided in the Source: Chapter 26, Communications, Planning Commission of India, p. 2
Appendix 2. The market share of the companies in terms of
customer base is given in Appendix 3. 1.4 FDI in Telecom
To attract FDI inflow and to make the sector more attractive
1.3 Regulatory framework of Indian Telecom Industry and investor friendly, Government raised FDI limit for the telecom
Till 1994, government of India was having the monopoly. services from 74 per cent to 100 per cent6. The FDI is critical as
It was in 1994, when the National Telecom Policy (NTP), the industry is both capital and technology intensive. The FDI
1994 was brought out by the government, private sector into the telecom industry in the recent past is provided with in
participation began in the basic services. The other the Appendix 4.

Section 2 Pacific with only 15.5 million wireline broadband subscribers and
2. Growth driversand challenges 83.7 million wireless broadband subscribers using above 512 kbps
2.1 Growth drivers as of March, 2015. This can be attributed mainly to low personal
In fact, telecom industry itself is a growth driver of Indian computer penetration due to its high cost, and lack of widespread 3G
economy. E-commerce, net banking, mobile banking, payment banks, and BWA services. Now with the proliferation of 3G & HSD services,
digitisation, benign policy framework, demographic advantage, and availability of a variety of smartphones, phablets and tablets
affordable voice and data services, competition, DTH digitisation, at affordable pricing levels, broadband penetration is expected to
mobile broadband etc. are contributing for the growth of telecom increase at a much faster rate. [Source: Reliance Communications
industry in India. The following aspects (sourced from Annual reports Annual Report 2014-15, p. 33]
of telecom companies and research reports of consulting firms) drive Rural demand potential:
and propel the telecom industry in India. Lower penetration in rural India indicates the growth opportunity
Favourable demographics: for the voice business going forward. [Source: Idea Cellular Annual
India enjoys favourable demographics for internet penetration than Report 2014-15, p. 46]. Also, 100 per cent village electrification by
many countries of the world; around 75% of its online population are May 2018 can help promote telecom services throughout the country.
aged between 15 and 34. [Source: Bharti Airtel Annual Report 2014- [Source: KPMG - Telecommunications Union Budget 2016 Post-
15, p. 79] budget sectoral point of view].
Consolidation and Policy certainty:
The proposed telecom policy environment through M&A rules, 2.2 Challenges
spectrum sharing guidelines and 20-year spectrum positions for the Telecom companies face challenges like higher licence fees and
telecom operators emerging post the recently concluded auctions annual spectrum user charges. The lack of clarity on tax implication
not only provide for business certainty, but also encourage industry of spectrum trading is another issue. Poor infrastructure in rural
consolidation and robust growth. [Source: Bharti Airtel Annual Report areas is an impediment for growth in rural region. Stiff competition,
2014-15, p. 80] price war, drop in ARPU (Average Revenue Per User), incremental
Compelling price: investment in ever changing technology etc. are bothering the
In an environment of intense competition and significant regulatory industry. The bargaining power of the customers is high due to the
pressures, the price of mobile services has tended to reduce over mobile number portability (MNP). The Mobile Number Portability
time. [Source: Vodafone Group Plc Annual Report 2014, p. 18] (MNP) was implemented nationwide on January 20, 2011 and nearly
Digital India: 124 million customers have availed the MNP facility offered by Indian
It is a program to transform India into a digitally empowered Mobile Industry7.
society and knowledge economy. Firstly, the Government has As per KPMG8, the issues / challenges of telecom sector are:
clearly identified the 3 key areas -‘Digital Infrastructure as a Utility h High cost of spectrum and capital investments
to Every Citizen’, ‘Governance & Services on Demand’ and ‘Digital h Complex tax structures resulting in multiple tax levies
Empowerment of Citizens’ which are supported by 9 pillars with the h Debt and costs of funding
aim of connecting 250,000 Gram Panchayats in phased manner h Uncertainty over Over-the-Top (OTT) players and implications
and providing most of the government services via digital platform. of net neutrality on revenue models
[Source: Idea Cellular Annual Report 2014-15, p. 36] h Difficulties in Capital Expenditure (CAPEX) deployment
Spectrum Allocation: including Right of Way (RoW) norms.
DoT has offered additional spectrum under 800 MHz, 1800
MHz and 2100 MHz band which can be used for the advanced Section 3
technologies like 3G or 4G; along with the added efforts initiated by Revenue, costs, and KPIs of the industry
DoT towards spectrum harmonization. [Source: Idea Cellular Annual
Report 2014-15, p. 36] The business model is captured by the revenue verticals and cost
Internet of things: structure. The performance evaluation and analysis is done through
These are transforming the lives of 1.25 billion people as they rely the key performance indicators (KPIs).
on it for various purposes from online shopping, entertainment, 3.1 Revenue
education to healthcare, payment mechanisms and so on. Such a Total Revenue = f (Subscribers’ base, products mix, realisation from
scenario is driving mobile commerce. [Source: Bharti Airtel Annual each offering, regulations, volatility in currency exchange rates, Net gain
Report 2014-15, p. 79] or loss due to MNP)
Broadband penetration: The number of subscribers represents the market pie. The appendix
India’s broadband penetration is among the lowest in the Asia- 3 provides the data on market share of each telecom company in

COVE R S TO RY
India. The product mix is the ratio of each revenue segment to the 3.3 KPIs
total revenue. The segments or the verticals are important as each The key performance indicators (KPIs) help in analysing
segment’s resource utilisation differs and hence the segments’ mix the performance of the business enterprises. KPIs provide
determines the contribution to the bottom line. The realisation performance metrics for assessment and evaluation. Apart from
from each segment is crucial. The regulations of TRAI would impact the traditional ratios such as profitability ratios, solvency ratios,
on the revenue (roaming charges, inter connect fees) earned by liquidity and turnover ratios, the following KPIs are used in the
telecom companies. For companies operating in foreign countries, telecom industry.
the respective country’sregulations will impact the revenue earned
from abroad operations. The volatility in the currency exchange rate Table 3.3 : KPIs
will have its impact on the margin. As said in para 2.2, the bargaining
power of the customers is high due to MNP The revenue segments of KPI Explanation
telecom companies are provided in the following table. Number of subscribers at the end of the
EOP Subs (in 000’s)
period under review
Table 3.1 Revenue Segments of telecom companies
Segments Explanation Number of telephone connections for every
Teledensity
Wireless and fixed line technology, national and hundred individuals living within an area.
Telecom & international long distance connectivity. It compris-
Telemedia es voice revenue, SMS, data revenue, VAS revenue,
Broadband, wired and wireless, 2G, 3G & 4G MOU (in mins/sub) Minutes of Usage per subscriber
RPM (in Rs) Revenue Per Minute in rupees

Digital TV andInternet Protocol television (IPTV)
DTH
services ARPU (in Rs) Average Revenue Per User
Mobile Banking Services: Business correspondent MOUs (in mn) Minutes Of Usage
Mobile
business, payment bank, Mobile wallet, money
Commerce Net MNP gain Testimony of end to end quality offering
transfer, utility bills payments, NEFT, IMPS
(Mobile Number
Passive Portability)
Infrastructure Services, tower sharing on lease basis
Infrastructure
Consumer mobile It measures the extent to which present cus-
End-to-end telecom solutions to big firms, network net promoter score tomers would recommend the telecom service
Network integration, data centres, managed services, (NPS) provider to friends and family.
enterprise mobility applications and digital media
Source: Compiled from Annual reports of telecom companies Capex productivity Utilisation of capital investment
3.2 Costs Opex productivity Operating efficiency

Network expenses, access fees, license and spectrum changes
Note: For micro analysis one can have Voice RPM, Non-Voice RPM,
are major costs. In case of government enterprises like MTNL Data Usage in MBs, SMS+VAS revenue in rupees etc
and BSNL, employee costs are significant. The regulations of Source: Co.mpiled from TRAI publications, Annual reports of telecom
TRAI would impact on the costs such as spectrum usage charges companies
and license fees incurred by telecom companies.Capex mainly
includes spectrum buying and network equipment. For the performance evaluation, KPIs of a company may be
The costs incurred by telecom companies are provided in the compared with the industry average (the industry average is
following table. available in Appendix 5) and also may be benchmarked with the
Table 3.2 piers.
Costs of telecom companies
License Fee and spectrum usage charges

Section 4
Conclusion
Roaming and Access charges
Telecom industry in India is poised for an interesting journey.
Network expenses This is true in a tech savvy country like India. The factors
Subscriber acquisition and service cost like digitisation, internet penetration, internet of things,
Employee cost
data revolution, disruptive innovations etc. augur well for
the revolution in the telecom industry. The liberalisation,
Sales and promotion expenses
favourable FDI norms, rationalisation of regulations, make
Source: Compiled from Annual report of telecom companies
in India initiative, customer centric approach, etc. pave the

way for growth, consolidation and maturity of the industry. Appendix 3
Telecom is the greatest enabler of inclusive growth. Market Share in terms of Customers base
Subscribers as on Sep 2015

Appendix 1
List of Cellular Mobile (GSM & CDMA) Service Providers currently Companies Number in
% to total Rank
providing service [As on 30th Sept 2015] Millions
Service Bharti Airtel 238.74 23.35 1

Sl No. Area of Operation
Provider
1 Bharti All India Vodafone 188.26 18.41 2
2 Aircel Group All India

Idea Cellular 166.56 16.29 3
Reliance
3 Communica- All India (except Assam & NE) Reliance Commu-
111.55 10.91 4
tions nications
Reliance Kolkata, MP, WB, HP, Bihar, Orissa, Assam
4 BSNL 95.34 9.32 5
Telecom & NE
5 Vodafone All India
Aircel 84.00 8.21 6
Tata Teleser-
6 All India except Assam, NE & J&K Tata Communi-
vices 63.73 6.23 7
cations
7 IDEA All India
TataTeleservice 47.78 4.67 8
Delhi, Kolkata, Gujarat , Karnataka, Tamil
Sistema Shy- Nadu
8
amTelelink (incl. Chennai) , Kerala, UP(W), Rajasthan MTNL 7.13 0.70 9
& W.B.
9 All India (except Delhi & Mumbai) Others 19.52 1.91 10
BSNL
10 MTNL Delhi & Mumbai Total 1,022.61 100.00
Source: TRAI, The Indian Telecom Services Performance Indicators,
Source:Compiled from TRAI, The Indian Telecom Services Perfor-
July-Sept, 2015, New Delhi, India, 16th Feb, 2016
mance Indicators, July-Sept, 2015, New Delhi, India, 16th Feb, 2016
Appendix 2
Types of Services offered by Telecom Companies Appendix 4
SL No. Types of Services SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS:
Amount in Rs. crores (US$ in million)
1 Basic Service Licencees
Cumu-
2 Cellular Mobile Service Licencees 2013- lative
2014-15 2015-16 % to
14 Flows
3 Internet Service Providers Rank Sector Apr- Apr 15 Total
Apr- Apr ‘00
Mar -Dec 15 Inflows
Mar to Dec
4 National Long Distance Service Licencees
‘15
5 International Long Distance Service Licencees
6 PMRTS* Service Licencees Tele- 7,987 17,372 6,936 91,027

4* 7%
com (1,307) (2,895) (1,072) (18,130)
7 Unified Access Service Licencees
8 VSAT** Service Licencees Note: * The first three ranks were bagged by Services, construction
and computer hardware & software sectors
* Public Mobile Radio Trunked Service
** Very Small Aperture Terminal Source: FACT SHEET ON FOREIGN DIRECT INVESTMENT (FDI), From
APRIL, 2000 to DECEMBER, 2015, p.2
Source: http://trai.gov.in/Content/ProviderListDisp/Listofspc.aspx

COVE R S TO RY
Appendix 5
References:
Snapshot of KPIs of Indian Telecom Industry 1.Bharti Airtel, Annual Report 2014-15
2.BSNL, Annual Report 2014-15
Data As on 30th Sept, 3.Chapter 26, Communications, Planning Commission of India, pp.1-41
Parameters
2015) 4. Deloitte - Indian Tower Industry The Future Is Data, June 2015
Usage Parameters 5. Deloitte Report, Impact on Technology, Media & Telecom, Budget
Telecom Subscribers (Wireless +Wireline) 1,022.61 Million 2016
6.Dun & Bradstreet India Report, https://www.dnb.co.in/
Market share of Private Operators 89.98%
IndianTelecomIndustry/OverviewTI.asp
Market share of PSU Operators 10.02% 7. FACT SHEET ON FOREIGN DIRECT INVESTMENT (FDI), From
Teledensity 80.98% APRIL, 2000 to DECEMBER, 2015
Total Internet Subscribers 324.95 Million 8. Idea Cellular, Annual Report 2014-15
9. KPMG - Telecommunications Union Budget 2016 Post-budget
Revenue & Usage Parameters
sectoral point of view
Monthly ARPU GSM Full Mobility Service Rs. 122 10. MTNL, Annual Report 2014-15
Monthly ARPU CDMA Full Mobility Service Rs. 106 11. PwC view - Five trends to watch in Indian telecom in 2016
Minutes of Usage (MOU) per subscriber 12. Reliance Communications, Annual Report 2014-15
374 Minutes
per month - GSM 13. Technology Digest, Bulletin of telecom technology, Issue 23, July
Minutes of Usage (MOU) per subscriber 2015, TRAI Publication
256 Minutes
per month - CDMA 14. Telecom Regulatory Authority of India, The Indian Telecom Services
Data Usage per subscriber per month - Performance Indicators, July-Sept, 2015, New Delhi, India, 16th Feb,
109.89 MB
GSM 2016
Data Usage per subscriber per month - 15. Vodafone Group Plc, Annual Report 2015
316.37 MB
CDMA
Data Usage per subscriber per month –
120.11 MB
Total(GSM+CDMA)
Source: TRAI, The Indian Telecom Services Performance Indicators,
July-Sept, 2015, New Delhi, India, 16th Feb, 2016 [email protected]
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?
working capital investment policy (i.e., low level / high level
of current assets in relation to total assets respectively)
or it may adopt aggressive / conservative working capital
financing policy (i.e., high level / low level of current liabilities
in relation to total assets respectively). High level of current
assets may have negative impact on profitability, whereas
a low level of current assets may have low level of liquidity.
Hence, there should be an optimum investment in both
C O V E R S TO RY
CMA Dr. Sudipta Ghosh current and fixed assets for maximization of the value of a
Assistant Professor firm. An optimum level of working capital is one where there
Prabhat Kumar College, Contai is a trade-off between liquidity and profitability.
Considering the importance of working capital policies in
the context of profitability, the present study is an attempt to
1. Theoretical Underpinnings examine whether working capital policy affect profitability of
Management of working capital plays an important role the central telecommunication companies in India.
for the firm’s profitability and its value. In fact, efficient 2. Prior Evidence And Identification Of Research Gap
management of working capital is a part of the overall
corporate strategy to create shareholder’s value. By Some of the notable studies that have been carried out in
understanding the role and determinants of working capital the area of working capital are briefly summarized as follows:
properly, companies can reduce their level of risk and
improve the overall scenario of profitability. 2.1 Empirical Studies
In practice, a firm may adopt aggressive / conservative Gupta and Ronald (1972) studied the differences in the

COVE R S TO RY
average financial ratios between industries. They concluded companies in India. To achieve this prime objective, the following
that there were differences in the average activity, liquidity and incidental objectives are sought to be achieved:
profitability ratios between industry groups. To examine working capital policy in terms of working capital
Pinches, et al. (1973) employed factor analysis for classification investment policy and working capital financing policy.
of ratios and found that the classifications were stable over the To examine the relationship between working capital
time period from 1951 to 1969. investment policy and working capital financing policy.
Chu, et al. (1991) examined the differences of financial ratio To examine the impact of working capital policy on profitability.
groups between the hospital sectors and industrial firm sectors.
They concluded that there were significant differences in the 4. Hypotheses Development
financial ratio groups between the two sectors. In conformity with the objectives of the study, the following
Soenen (1993) examined the relationship between net trade testable hypotheses are formulated as under:
cycle and return on investment of U.S. firms. The study results 1st Hypothesis:
revealed a negative relationship between the length of net trade H0 (1): There is no significant relationship between working
cycle and return on assets. Further, this negative relationship was capital investment policy and working capital financing policy.
found to be different across industries depending on the type of HA (1): There is significant relationship between working capital
industry. investment policy and working capital financing policy.
Lamberson (1995) observed that there was a very small 2nd Hypothesis:
relationship between changes in economic conditions and H0 (2): There is no significant impact of working capital policy
changes in working capital. on profitability.
Jose, et al. (1996) examined the relationship between aggressive HA (2): There is significant impact of working capital policy on
working capital and profitability of U.S. firms. The study results profitability.
revealed a significant negative relationship between the cash 5. Research Design
conversion cycle (representing working capital management) and
5.1 Sample Selection
profitability.
The sample of the study covers all the central telecommunication
Weinraub and Visscher (1998) examined the relative
companies operating in India. The list of central companies falling
relationship between aggressive / conservative working capital within telecommunication industry is presented in Table – I below:
policies of U.S. firms during 1984 to 1993. The researchers
concluded that the selected industries had significantly different Table – I: List of Central Telecommunication Companies
working capital management policies during the period under SL. No. Name of the Company
study.
Filbeek and Krueger (2005) analyzed the working capital 1 Mahanagar Telephone Nigam Ltd. (MTNL)
management policies of 32 non-financial industries in U.S.A. 2 Bharat Sanchar Nigam Ltd. (BSNL)
The findings of the study revealed that there were significant
3 Millennium Telecom Ltd. (MTL)
differences between the industries in working capital practices
4 Railtel Corporation of India Ltd. (RCIL)
over time.
Similar other studies have been carried out by Howorth & 5 Bharat Broadband Network Ltd. (BBNL)
Westhead (2003), Ghosh & Maji (2004), Eljelly (2004), and
Lazaridis & Tryfonidis (2006). 5.2 Study Period
2.2. Research Gap The study has been carried out for a span of ten years i.e., from the
Although, several studies have been carried out in the area of financial year 2004-05 to the financial year 2013-14. The chosen
working capital management, little empirical research has been study period is long enough to indicate the financial conditions of
done to examine the relationship between working capital policy the companies passing through various stages of business cycle.
and profitability. Hence, the present study is expected to con- 5.3 Data Source
tribute to the better understanding of working capital policy and
its affect on profitability in the liberalized and highly competitive For the present study, secondary data have been used which are
telecommunication market in India. collected from the published annual reports of Public Enterprises
Survey.
3. Research Objectives 5.4 Methodology

The prime objective of the study is to examine whether working In this study, working capital investment policy and working
capital policy affect profitability of the central telecommunication capital financing policy are used as proxy for working capital

policy. Aggressive working capital investment policy indicates ROE = a + b1 (WCIP) + b2 (WCFP) + e --------------------eq. (4)
low level of investment in current assets, while a conservative Where:
working capital investment policy involves high level of current a and b = parameters indicating intercept and coefficient
assets. On the other hand, aggressive working capital financing respectively;
policy is represented by high level of current liabilities, while a e = error term of the models;
conservative working capital financing policy is represented by ROTA = Return on Total Assets;
low level of current liabilities. ROCE = Return on Capital Employed; and
In this context, the performance indicators of working capital ROE = Return on Equity.
policy and profitability are measured by the following ratios (Table To detect the problem of autocorrelation, Durbin-Watson (D.W.)
- II): d statistic is applied in the study. The presence of autocorrelation
(if any) is adjusted by the technique of first difference operator.
Table – II: Measures of Working Capital Policy and The D.W. statistic is computed as follows:
Profitability
t=n t=n
Performance
Performance Drivers Performance Measures d = Σ (Ût - Ût – 1)2 ÷ Σ Û2t--------------------------eq. (5)
Indicators
t=2 t=1
Working Capital Invest- Total Current Assets ÷ The above ratio indicates the sum of squared differences in
ment Policy (WCIP) Total Assets successive residuals to the RSS.
Working Apart from the above, simple statistical measures like mean,
Capital Working Capital Financ- Total Current Liabilities ÷ standard deviation and coefficient of variation are applied in the
Policy ing Policy (WCFP) Total Assets study. Moreover, the study uses aggregate data in order to arrive
at a meaningful conclusion. For testing of hypothesis, 1% and
Return on Total Assets Profit after Tax ÷ Total 5% levels of significance are considered in the study. Necessary
(ROTA) Assets calculations have been done with the help of SPSS and Microsoft
Return on Capital Excel software packages.
EBIT ÷ Capital Employed
Employed (ROCE)
6. Research Findings And Analysis
Profitability Profit after Tax ÷ Share- 6.1 Analysis of Working Capital Policy
Return on Equity (ROE)
holders Equity
Working capital policy represented by WCIP and WCFP of
Karl Pearson’s correlation coefficient is used to measure the central telecommunication companies in India are shown in Table
relationship between working capital investment policy and – III and graphically in Figure – 1.
working capital financing policy. The Karl Pearson’s correlation
coefficient is computed as follows: Table – III: Working Capital Policy of Central
Karl Pearson’s Correlation Coefficient Telecommunication Companies (in aggregate)
(rxy) = � ∑ �� ∑ �� ∑ ��
√� ∑ �� ∑ �� √� ∑ �� ∑ ��
--------eq. (1)
Year Working Capital Invest- Working Capital Financ-
ment Policy (WCIP) ing Policy (WCFP)
The significance of the correlation coefficient is tested by t- test (%) (%)
which is shown below: 2004-05 56.43 34.54
t = ௥
ሺభషೝమ ሻ 2005-06 63.00 34.30
ට
ሺ೙షమሻ
2006-07 63.94 29.85
Where: r = correlation coefficient; n-2 = degrees of freedom.
2007-08 69.05 31.63
The impact of working capital policy on profitability 2008-09 70.74 35.04
(represented by Return on Total Assets, Return on Equity, and 2009-10 72.88 73.68
Return on Capital Employed) has been analyzed by the technique 2010-11 40.24 44.76
of regression equations. The regression models applied in the
2011-12 16.64 19.12
study are shown below:
ROTA = a + b1 (WCIP) + b2 (WCFP) + e-------------------eq. (2) 2012-13 16.64 22.60
ROCE = a + b1 (WCIP) + b2 (WCFP) + e-------------------eq. (3) 2013-14 21.95 24.80

COVE R S TO RY
Year Working Capital Invest- Working Capital Financ- 6.3 Impact Analysis of Working Capital Policy on Profitability
ment Policy (WCIP) ing Policy (WCFP) In this section, the impact of working capital policy (i.e., WCIP
(%) (%) and WCFP) on profitability has been analyzed through commonly
Average 49.15 35.03 used accounting based measures of profitability i.e., Return on
S.D. 23.15 15.42
Total Assets (ROTA), Return on Capital Employed (ROCE), and
Return on Equity (ROE).
C.V. 47.10 44.02
As reported in Table – V, the value of R2, and Adjusted R2
indicates a moderate fit of the regression equation (eq. 2). Table
– V shows that working capital investment policy has a positive
impact (b = 0.339) on profitability represented by ROTA, which
is significant at 5% level, thereby leading to the rejection of
the second null hypothesis of the study. However, the result is
observed to be insignificant in case of working capital financing
policy.
Table – V: Regression Analysis of Working Capital Policy

and ROTA
With respect to investment policy (WCIP), Table – III and R2 = 0.599; Adjusted R2 = 0.484; D.W. = 0.906
Figure – 1 reveals a relatively conservative investment policy
Working Capital Investment Working Capital Financing Policy
during the first six years, while aggressive investment policy is Policy (WCIP) (WCFP)
observed in the remaining years under study. On the average Beta Coefficient t - value Beta Coefficient (b) t - value
(49.15%), the Indian telecommunication companies (in aggregate) (b)
have maintained almost a moderate (i.e., neither aggressive nor 0.339** 3.230 -0.317i -2.010
conservative) investment policy during the period under study.
On the hand, the telecommunication companies in India have Key Notes:
shown a relatively conservative financing policy (WCFP) during all 1) ** marked value indicates significant at 5% level (2-tailed).
the years (except the year 2009-10) under study with an average 2) i marked value indicates insignificant.
of 35.03%. As observed in Table – VI, the value of R2 and Adjusted R2
The Coefficient of Variation (C.V.) of WCIP and WCFP is found indicates a good fit of the regression equation (eq. 3). Profitability
to be 47.10% and 44.02% respectively during the study period. performance represented by ROCE has been positively influenced
by working capital investment policy which is significant at 1%
6.2 Relationship between Working Capital Investment Policy level, while the same is negatively influenced by working capital
and Working Capital Financing Policy financing policy which is found to be significant at 5% level. This
To measure the relationship between WCIP and WCFP, correlation leads to the rejection of the second null hypothesis of the study.
technique is used in the study. Table – IV shows a positive corre-
lation coefficient (0.583) between WCIP and WCFP, although the Table – VI: Regression Analysis of Working Capital Policy
relationship is found to be statistically insignificant. This implies and ROCE
that working capital investment policy does not corroborate to the
R2 = 0.855; Adjusted R2 = 0.814; D.W. = 0.715
working capital financing policy during the period under study.
This also leads to the acceptance of the first null hypothesis of Working Capital Investment Working Capital Financing Policy
the study. Policy (WCIP) (WCFP)
Beta Coefficient (b) t - value Beta Coefficient (b) t - value
Table – IV: Correlation Coefficient between WCIP and WCFP
Performance Indicators Correlation Coefficient (rxy) 0.517*** 6.386 -0.377** -3.100
Key Notes:
WCIP and WCFP 0.583i
1) *** marked value indicates significant at 1% level (2-tailed).
(2.030)
2) ** marked value indicates significant at 5% level (2-tailed).
Key Notes: The value of R2 and Adjusted R2 as observed in Table – VII
1) i marked value indicates insignificant. indicates a moderate fit of the regression equation (eq. 4).
2) Figure in the bracket indicates t – value. Working capital investment policy has a positive impact
(b = 0.472) on profitability represented by ROE, which is found

A firm may adopt aggressive working capital
to be significant at 5% level, thereby leading to the rejection of policy (i.e., low level of current assets in relation
the second null hypothesis of the study. In case of working capital to total assets) or it may also be used for financing
financing policy, the result is observed to be insignificant. decisions of the firm in the form of high level of
current liabilities in relation to total assets. In this
Table – VII: Regression Analysis of Working Capital Policy backdrop, the present study is an attempt to examine
and ROE whether working capital policy affect profitability
R2 = 0.589; Adjusted R2 = 0.472; D.W. = 1.201 of the central telecommunication companies in India
Working Capital Invest- Working Capital Financing Policy (WCFP)
during the period 2004-05 to 2013-14.
ment Policy (WCIP) On the average, the study found that central
Beta Coefficient t - value Beta Coefficient (b) t - value telecommunication companies in India follow
(b) conservative financing policy and moderate
0.472** 3.136 -0.330i -1.461 investment policy during the period under study.
Moreover, no significant relationship is observed
Key Notes: between working capital investment policy and
1) ** marked value indicates significant at 5% level (2-tailed) working capital financing policy. Finally, working
2) i marked value indicates insignificant. capital investment policy has a significant positive
effect on profitability, while working capital
7. Concluding Observations financing policy has a significant negative effect on
On the average, it may be stated that central telecommunication profitability (represented by ROCE).
companies in India follow conservative financing policy (also in all
the years) and moderate investment policy (although conservative Working Capital Management, Mid- American Journal of Business, 20 (2).
policy for the first six years) during the period under study. 3. Ghosh, S.K. and Maji, S.G. (2004), Working Capital Management
Moreover, the study found no significant relationship between Efficiency – A Study on the Indian Cement Industry, The Management
working capital investment policy and working capital financing Accountant, 39 (5).
policy. 4. Gupta, M.C. and Ronald, J.H. (1972), A Cluster Analysis Study of Financial
It is further observed that working capital investment policy has a Ratios and Industry Characteristics, Journal of Accounting Research, 10 (1).
significant positive effect on profitability in all the cases (i.e., ROTA, 5. Howorth, C. and Westhead, P. (2003), The Focus of Working Capital
ROCE, and ROE), which implies that an optimum level of current Management in UK Small Firms, Management Accounting Research, 14 (2).
assets has been maintained by the telecommunication companies 6. Jose, et al (1996), Corporate Returns and Cash Conversion Cycle, Journal
during the study period. Finally, working capital financing policy has of Economics and Finance, 20 (1).
a significant negative effect on profitability (represented by ROCE), 7. Khan, M.Y. and Jain, P.K. (2011), Financial Management – Text and
while in rest of the cases, the results are found to be insignificant. Problems, 6th Edition, Tata McGraw – Hill Publishing Company Ltd., New Delhi.
8. Kothari, C.R. (2011), Research Methodology – Methods and Techniques,
8. Limitations And Research Opportunities 2nd Edition, Tata McGraw – Hill Publishing Company Ltd., New Delhi.
The study is based on secondary data i.e., published annual 9. Lamberson, M. (1995), Changes in Working Capital of Small Firms in
reports. So, it is subject to all the limitations that are inherent in Relation to Changes in Economic Activity, Mid-American Journal of Business,
secondary data. Apart from it, the study employed accounting 10 (2).
based measures of profitability. 10. Lazaridis, I. and Tryfonidis, D. (2006), Relationship between Working
In spite of these limitations, further research may be undertaken Capital Management and Profitability of Listed Companies in the Athens Stock
by including private sector companies within the telecommunication Exchange, Journal of Financial Management and Analysis, 19 (1).
industry and using other market based measures of profitability. 11. Pinches, et al. (1973), The stability of Financial Patterns in Industrial
To arrive at a more meaningful conclusion in the context of this Organizations, Journal of Finance, 28 (2).
research problem, an in-depth study may be explored for different 12. Published Annual Reports of Public Enterprises Survey.
industries over a longer period of time. MA 13. Soenen, L.A. (1993), Cash Conversion Cycle and Corporate Profitability,
Journal of Cash Management.
References 14. Weinraub, H.J. and Visscher, S. (1998), Industry Practice Relating to
1. Chu, et al. (1991), An Empirical Analysis of Cash Flow, Working Aggressive Conservative Working Capital Policies, Journal of Financial and
Capital, and the Stability of Financial Ratio Groups in the Hospital Industry, Strategic Decisions, Vol.11, No.2.
Journal of Accounting and Public Policy, 10 (1).
2. Filbeck, G. and Krueger, T. (2005), Industry Related Differences in [email protected]

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in
Telecommunication
Industry
IFRS 15 (Revenue from contract with customer) is being applied with effect from1st
January, 2017. The new standard is making a significant impact on telecom industry,
because of its nature of business, where the industry profusely enters into bundle
contract with the customers. Revenue is to be recognised when (or as) the entity satisfies
each performance obligation. IFRS 15 is not limited to accounting treatment, but wisely
impact on strategical business decision, marketing channel and internal system and
processes. Currently the industry is in consolidation phase across the world, the new
standard enrich this trend much faster and competitive.

the customer has no any difference from IAS 18 over a
period of contract, but because of time differences and
allocation of amount to different obligations, IFRS 15
requires significant changes in a particular financial year.
Because of such changes in Revenue, EBITDA and Net
Profitalsoget affected significantly.In the Balance sheet
part, contractual assets and liabilities will have larger
impact, leads changes in working capital changes and
CMA Shashikant Choubey
covenant compliance.Along with that, the entity must
Assistant Finance Controller
consider significant change in Tax liabilities, Budget &
Aljazirahford, Riyadh Saudi Arabia
Planning, Costing,Strategic decisions and reporting to
stakeholders and stock exchange.
IFRS 15 (Revenue from Contract with Customer)is The dynamic telecom industries passing through a
becoming a reality with effect from 1st January, 2017 global consolidation phase. The new standard will enrich
across the world. Revenue is a key and judgmental this trend much faster in such a competitive scenario.
economic parameter for an entity or industry. Recognition, Therefore, following IFRS 15, if an entity loosing customer
measurement and discloser of current pattern of revenue market share, will lose revenue more rapidly as compared
are changing under the new standard.Telecom industry to old revenue standard because high revenue amount
iscorroborates to be one of the most affected and recognized at the beginning and comparatively lower
venerable on implementation of IFRS 15.Other industries revenue in subsequent periods. IFRS 15 is not limited to
too like Real Estate, Software and long term contracts accounting activities, but it has consequential changes
would be affected equally. This happens, mainly because in shape and size of income statement and balance
of ‘bundle’ transaction and multiple obligations under one sheet. It witnesses a long lasting impact on investments,
single contract and time value of money. A unique feature compliances, covenants, software changes and reporting
used in the telecom industry is ‘bundle’ offer to customer. for the telecom entities.The new standard compels the
Bundle transaction refers, (product + Service) offered to industry to apply different strategy and approach of
customer under a single contract expires within a year or marketing, pricing and other factors to meet the new
more. The bundle transaction offered from a telecom entity requirement without much affecting their financials. Let
may include and / or not limited to, us discuss the new standard in brief and how it affects
Combination of Voice & Data, the industry.
Voice, Data &Hardware (Handset, Setup box, modem
etc.), IFRS 15 – a five model test to recognize revenue
Hardware& data, 1. Identify the contract(s) with customer
Voice &Hardwareand so onoffered by the telecom leads an enforceable agreement of right and
operators to their customers. obligations between two or more parties.
C O V E R S TO RY
Presently telecom operators accustomed to report their 2. Identify the performance obligations in the
revenue based on real/existing sale price. If the handset contract
standalone price is INR, 6,000 offered free along with is a promise to the customer to transfer goods /
network services, handset revenue will be treated as zero. services to the customer.
But under new standard, a price to be allocated to handset 3. Determine the transaction Price
too along with others, based on standard criteria, makes the amount of consideration, to which an entity
significant difference from present standard.Transactions expects to be entitled in exchange for transferring
are also to be adjusted in accordance with ‘time value of goods or services to the customer, excluding
money’if it has significant financialcomponent.Accordingly, amount collected on behalf of a third parties.
if the telecom entities receive money in advance from 4. Allocate the transaction price to the
customer, where contractual obligation expires for more performance obligations in the contract
than of 12 months,amount to be discounted with net Under a contract that has more than one
present value of money while recognizing revenue in performance obligation, an entity should allocate
subsequent period. the transaction price to each performance
Though accounting of overall cash receipts from obligation in an amount that depicts the amount

of consideration to which the entity expects to be / commission of acquiring a customer’.
entitled in exchange for satisfying each performance
obligation. Illustration
5. Recognize the revenue when the entity satisfies the Just to understand above, let us take a practical example.
performance obligations. A telecom service provider, named XYZ Limited offers to their
Out of above, number (4), allocation of transaction price customers a mobile handset, voice network services and data
is very relevant as far as telecom industry is concern. network services. On 1st July, 2017, the entity entered into a
Under IAS 18, revenue is defined as gross inflow of contract with a customer TTK, offering him all three product
economic benefits arising from ordinary operating and services for INR 13,500, though individual selling price for
activities of an entity. Thus, if a telecom entity offers, free these are INR 16,800 as mentioned below.Further it is known
handset along with mobile connection to a customer, that inventory cost of handset is INR 3,500. Based on above
revenue recognized from handset is zero (0 or else). Full assumptions, revenue recognition, cost and EBITDA is summarized
amount received from the customer treated as service in the following table along with related journal entries under IAS
revenue. In general the entities treat cost of handset 18 and IFRS 15:
(less residual value of cash income over services) as ‘cost
Revenue Recognition and Accounting Treatment

Bundle selling
Goods and Services offered Standalone selling % of
price for all IAS 18 IFRS 15
by XYZ Limited price of each item Total
the three
2017-18 2018-19 2017-18 2018-19
Handset 6,000 36% - - - 4,821 (36% of -
13,500)
Network- Voice 3,600 21% - 1,800 (3,600/2) 1,800 (3,600/2) 1,446 (21% of 1,446 (21% of
13,500/2) 13,500/2)
Network- Data 7,200 43% - 7,200 (3,600/2) 7,200 (3,600/2) 2,893 (43% of 2,893 (43%
13,500/2) of 13,500/2)
Total 16,800 100% 13,500 5,400 5,400 9,161 4,339
Cost
Handset 3,500 - 3,500 - - 3,500 -
Customer acquisition cost - - - 800 - - -
Network-Voice 2,178 - 2,178 1,080 1,098 1,080 1,098
Network -data 4,788 - 4,788 2,736 2,412 2,736 2,412
Total Cost 10,,466 - 10,466 4,256 3,510 6,956 3,510
EBITDA 6,334 - 3,034 1,144 1,890 2,205 829
EBITDA % to Revenue - - - 21% 35% 24% 19%
Revenue recognition and related journal entries for the item sold as bundle
1.On receiving of cash from customer
Cash /Bank/Debtors Dr. 13,500 - 13,500 -
Unbilled / Deferred Revenue Cr. 13,500 - 13,500 -
2. On delivery of Handset to Customer
Cost of Handset Dr. 3,500 - 3,500 -
Inventory Cr. 3,500 - 3,500 -
3. Charging the differential value to cost of acquisition of customer
Unbilled / Deferred Revenue Dr. 2,700 - - -
Cost of acquisition of customer Dr. 800 - - -
Cost of Handset Cr. 3,500 - - -
4. On allocating of revenue towards handset and network services
Unbilled / Deferred Revenue Dr. 5,400 5,400 - -

COVE R S TO RY
Handset Revenue Cr. - - 4,821 -

Network Services-Voice Revenue Cr. 1,800 1,800 1,446 1,446
Network Services- Data Revenue Cr. 3,600 3,600 2,893 2,893
For making the explanation simple, it is assumed that the 4. IT system and existing software need a major change to
customer has availed the services of networks equally during meet the new requirement and maintain the data. Under
2017-18 and 2018-19. In general it never happens and the practical current revenue recognition, system generates revenue
adventure is much more complex than that. Also time value of information in line and consistent with cash inflow from the
money is ignored in above situation since contract expires within customer. But under new rule, there is need to bring a logic
12 months period. to identify what is the revenue and when and how much it is
Under IAS 18, cost of acquisition of customer is 800 = Cost of to be considered for accounting. This would be possible only
handset – Residual value of economic benefits = 3,500- 2,700. when the system is able to maintain systematic portfolio
Residual value = Total Economic benefits – Network Revenue - data for revenue calculation.
(13,500-3,600-7,200). In this example, cost handset is less than 5. Existing contract (s) should be re arranged in accordance
the residual value, where if the cost of handset exceeds residual with the new standard and differential journal to be passed
value, such excess difference transfers as handset revenue. For during 2016 itself.
example, if the cost of hand set is only INR 2,500, than, 200 6. Time value of money to be applied in accordance with the
(2,700-2,500) transfers as handset revenue. general price index and / or cost of investments.
Have a look at the above table, under IAS 18, the revenue is 7. Under the new standard, telecom and software industries
5,400, where under IFRS 15, the revenue recognized as 9,161 recognize revenue earlier than the IAS 18. As we saw, the
during 2017-18 (170% jump) and consequential EBITDA has 193% telecom operator must allocate a part of revenue to the free
jump from 1,144 to 2,205.During next year (2018-19) it reduced handset.
drastically from 1,890 to 829 (44%). In telecom industry, where 8. Since it applies from 2017, the corresponding data and
a number of options offered to customers with different time figures must be regrouped for the year 2016 also.
frame and value, things will become much more complex to get 9. In general, telecom operators have different type of
into and understand.In practice, when multiple similar contracts contracts with customer, each type is required to dealt and
or other contracts analyzed together, revenue at beginning will evaluate separately.
much higher than the present standard. Consequently, revenue 10. Telecom entities charge upfront fees, like activation
in subsequent years will be much lower as compared to IAS 18. charges- needs to be judged if the amount is nonrefundable,
In general corporate customers entered into the contract for promised for which goods or services. If it is for future
more than a year or so, where time value of money becomesa obligations, the amount must be kept under unbilled
significant component. revenue.
11. Revenue to be charged on monthly basis in accordance
Applying IFRS 15 with performance obligation delivered to customer.
Certain salient point must be noted while applying IFRS 15.
1. It must applied from 1st January, 2017, without any option Applying Strategy
and because of that following standard treated as abolished Once we summarize all revenue contracts, it shall reveal,
IAS 18 - Revenue revenue curve moves in parallel to customer curve over a period of
IAS 11 - Construction Contracts time under the new standard which is not the same under present
SIC 31 - Revenue – Barter transaction involving advertising standard.Whole data to be simulated and a comprehensive
services exercise to be carried out about changes in Revenue, EBITDA,
IFRIC - 13 Customer loyalty programs EBIT, Net Profit and working capital. Accordingly a new strategy
IFRIC - 15 Agreements for the construction of real estate and required to discussed and developed about marketing, price, sale,
IFRIC - 18 Transfer of assets from customers product dimension and channels. MA
2. Every revenue contract must be evaluated and pass
through the 5 modelstests to define and recognize revenue. Reference
3. Entity needs to collect, collate and summarized millions of ifrs.org
statistical data about, type of contract, validity period, fair
value, standalone selling price to each type of customer and
period and so on. [email protected]

T
elecom industry is a capital intensive nature industry and it requires
C O V E R S TO RY
huge investment before starting service. Telecom services are provided
by using multiple telecom networks. Technological advancement has
made complicated to identify the cost of different services.
Telecom Regulatory Authority of India (TRAI) has issued guideline in 2012 to
comply “The Reporting System on Accounting Separation Regulation 2012”. It
is need of hour to rationalize the Accounting Separation in telecom industry
because:
Technological advancement has resulted convergence of network elements as
well as services
Accounting Separation of telecom network cost should be rationalized keeping
in mind IFRS implementation.
CMA Mohd. Ilyas Rai
Network elements need to relook its bifurcation because lots of elements
Dy. Manager (ERP-FICO)
separation is not adding value like bifurcation of networks into:
BSNL, New Delhi

COVE R S TO RY
Accounting Separation Report (ASR) as per TRAI

Telecom
Network Elements Details of Telecom Networks
Service
1 2 3
1. MOBILE SERVICE SWITCHING CENTER (MSC)/ GATEWAY MOBILE SERVICE SWITCHING CENTER
(GMSC)
2. MSC SERVER / VIRTUAL MSC
3. MEDIA GATEWAY (MGW) / GATEWAY MEDIA GATEWAY (GMGW)
4. VISITOR LOCATION REGISTER (VLR)
5 SERVING GPRS SUPPORT NODE (SGSN)
6 GATEWAY GPRS SUPPORT NODE (GGSN)

Core Network
7 VISITOR LOCATION REGISTER (VLR)
8 HOME LOCATION REGISTER (HLR)
9 AUTHENTICATION CENTER (AUC)
10 TRANSPONDER
11 SIGNALLING GATEWAY
12 OTHERS
Access Service Wireless (Full Mobility)
1 NODE-B-RADIO ACCESS NETWORK (RAN)
2 BASE TRANSCEIVER STATION (BTS)

Radio Access
3 RADIO NETWORK CONTROLLER (RNC)
Network
4 BASE STATION CONTROLLER (BSC)
5 OTHERS
1 TRANSMISSION MEDIA BETWEEN THE NETWORK ELEMENT OFC/CABLE/MICROWAVE

Transmission
Media/ Equipments 2 TRANSMISSION EQUIPMENT
3 OTHERS
1 SHORT MESSAGE SERVICE CENTER (SMSC)

2 MULTILEDIA MESSAGING SERVICE CENTER (MMSC)
3 HOME SUBSCRIBER SERVER (HSS)
4 APPLICATION SERVERS FOR VAS
5 NETWORK MANAGEMENT SYSTEM (NMS)

Other Network 6 BILLING SERVERS
Elements
7 IUC SERVER /ICB SERVER - INTERCONNECT BILLING SERVER
8 IN SERVERS
9 LAWFUL INTERCEPTION SERVER (LIS)
10 FACILITATION FOR MNP
11 OTHERS

TRAI has asked to bifurcate the asset cost as well as operational Telecom
Network Elements Invoice itemized details
expenses into around 136 network elements against 11 Telecom Service
services as per ASR 2012 but most of these do not add any value 1 2 3
Separate items should be
instead these make complex. Core Network
in invoice
Difficulty to bifurcate employee cost for example one employee Separate items should be
Radio Access Network
is engaged to maintain Core network GSM but core network itself in invoice
Access Transmission Media/ Separate items should be
bifurcated into 11 network elements as given above in point no 4. Service Equipments in invoice
Product/Component need to be relooked in present scenario Wireless
(Full Network Management Separate items should be
due to technological advancement and these separation in such System (NMS) in invoice
Mobility)
details level have been irrelevant for example: Application Servers Separate items should be
Name of Telecom Service Product/ Components for VAS in invoice
Separate items should be
Access Service Wholesale (Interconnection): Billing Servers
in invoice
Termination Voice call
Vendor provides details in tender bids, efforts should be made
Termination Video call that vendor should invoice suitably by grouping the same as
Termination SMS/ MMS desired so that at the time of capitalization of telecom network
Port charges including Co-Location elements can be done precisely as much as possible.
Transit Carriage Charges
Most of the telecom network is outsourced for maintenance
and the outsourced operational expenses need to be captured in
Other interconnect charges
telecom network element wise.
Internet Service Internet – Broadband Maintenance expenses should get bifurcated in tender level
Internet – Narrowband itself as desired in ASR so that vendor should provide invoice as
Internet Telephony telecom network elements wise and this will allow accounting for
Internet Protocol (IP) TV the maintenance expense correctly.
SAP Material Management Module has solution in single
Internet Content
maintenance Purchase Order (PO), user can bifurcate the
Webhosting and Web-collocation
maintenance expenses as desired level of network elements
Suggestion for improvement in Accounting Separation Records subject to Cost Centers have been created for the telecom
(ASR): network elements.
Network elements bifurcation should be upto broad level for Product/Components should be generic because in present
example: scenario lots of services got converged due to technological
advancement for example: MA
Telecom Service Network Elements
1 2
Name of
Core Network Telecom Product/ Components Remarks
Service
Radio Access Network
Internet – Broadband
Transmission Media/ Equipments Efforts are being made
Access Service Internet – Narrowband to have Broadband
Wireless (Full speed more than 512
Mobility) Network Management System (NMS) Internet Internet Telephony kbps and technology
Service Internet Protocol (IP) TV getting neutral.
Application Servers for VAS Bifurcation of Internet
Internet Content will not add value in
Billing Servers Webhosting and Web- ASR
collocation
Vendor invoice does not provide details of cost to comply
the ASR and this may result presumptive/allocation basis of Reference:
capitalization of telecom network cost. Guidelines for ‘The Reporting System On Accounting Separation
To get cost on Asset for capitalization as per the desired level Regulations, 2012 Of Trai - August 2012
of network elements, it should be clear in tender level itself to get
desired network elements level for example: [email protected]

CMA Lalitha Sitaraman
Retd. Senior Manager (SA) increasing GDP growth and tax revenue. It also aims at
Indian Overseas Bank, Chennai high quality standards and environmental protection. The
further initiatives of Digital India and Skill India launched
in July 2015 are aimed at supplementing the larger Make in
‘Make in India’ is an initiative by Government of India initiative. Digital India initiative aims at empowering
India, under the aegis of Prime Minister Shri Narendra every citizen with access to digital services, knowledge
MAKE IN INDIA
Modi, launched in September 2014, to encourage and information. Skill India initiative is a call to make
companies to manufacture their products in India. The India the skill capital of the world. The article aims at
major objective behind the initiative is to focus on 25 a constructive and critical evaluation of ‘Make in India’
sectors of the economy to facilitate investment, foster through the eyes of a cost accountant.
innovation, enhance skills, protect intellectual property
and build world class manufacturing infrastructure. Visibility of Make in India
The sectors are automobiles, automobile components, That the initiative of Make in India has kick started the
aviation, bio-technology, chemicals, construction, Indian industrial climate is becoming gradually visible.
defense manufacturing, electric machinery, electronic Start-up companies in India have now easy access
systems, food processing, IT-BPM, leather, media and to funds through angel networks. The participation of
entertainment, mining, oil and gas, pharmaceuticals, experienced entrepreneurs and experts in these networks
ports, railways, renewable energy, roads and highways, is a healthy trend now and they also contribute to the
space, textiles and garments, thermal power, tourism and mentoring for the start-ups. An Assocham study on start-
hospitality and wellness. The initiative hopes to attract ups has pointed out that India is expected to produce at
capital and technological investment in India thereby least a dozen billionaires among the start-ups in the next

five years in e-commerce, financial services and technology driven of Make in India initiative and the superset of general industrial
fields and that India will be among the top Asian start-ups along climate will have a contagious influence on each other. For
with China and South-east countries. example, at the recent Aerospace & Defence Manufacturing
The Nikkei Manufacturing Purchasing Managers’ Index (PMI) Summit organised by Bengaluru-based Society of Indian
in India showed that India was one of only four major economies Aerospace Technologies and Industries (SIATI), Defence and
(others being Brazil, Japan and South Korea), to record a growth aero PSUs had revealed the hurdles to ‘Make in India’. They
in manufacturing in July 2015 in an increasingly gloomy global had stated that it may be a tall order in the near term to reverse
economy. the 70 per cent import of military hardware, though they have
In the last week of July 2015,the Union Cabinet had approved started changing production strategies to meet the challenge.
the proposal of creating National Investment and Infrastructure Their refrain was that public defence manufacturing majors are
Fund (NIIF) whichwill make equity investments of ` 20,000 crore ready to source more from small and medium industries to meet
every year in commercially viable long gestation projects which the government’s Make in India mandate, but suppliers are falling
will help to kick-start the economy. short on facilities, quality and time lines.
Airbus Helicopters and a private manufacturer have proposed This emphasises the need for broadening the focus and for
a joint venture aiming to become the first private Indian having an integrated approach.
helicopter manufacturer under the Make in India initiative.
Consistency and compatibility
Make in India vis-a-vis other factors: Calling for adoption of June, 21 , as the International Day of
Make in India is a special focus on select sectors. It covers Yoga, in his address to the United Nations General Assembly ,
a vast area of the economy within the general industrial climate Hon’ble Prime Minister Shri Narendra Modi stated:
prevailing in the country. Needless to emphasise that the subset «Yoga is an invaluable gift of India›s ancient tradition. It

M AK E IN IN DIA
embodies unity of mind and body; thought and action; restraint the influence of tobacco industry. The Parliamentary Committee
and fulfillment; harmony between man and nature and a holistic on Subordinate Legislation recommended that that the issue
approach to health and well-being. Yoga is not about exercise but should be decided after consulting industry stakeholders. In
to discover the sense of oneness with ourselves, the world and Tamilnadu, the size of revenue (of more than ` 21,000 crores)
the Nature. By changing our lifestyle and creating consciousness, from liquor sales is stated to be one of the reasons which makes
it can help us deal with climate change. Let us work towards total prohibition not feasible in the State.
adopting an International Yoga Day.”
The India-led resolution with a record 175 co-sponsors was Is the focus really on?
adopted by the United Nations General Assembly in December Now, having found out a place in the focus list, how is the
2014 and June 21 was declared as International Day of Yoga. food processing industry contributing to Make in India initiative
The presence of food processing industry in the sectors is another question. The food processing industry had not
of Make in India is surprising in more than one way. If the apparently come to the rescue of milk, sugar or food grains
budgetary allocation concept of Zero Base Budgeting (ZBB) had when they are facing the problems of plenty.
been followed, food processing would not have found a place in In May 2015, large number of farmers in many districts of
the focused sectors, when the Prime Minister is professing the Tamilnadu were pouring milk into the open and alleged that the
importance of Yoga. In ZBB, projects are not given financial cooperative societies through which Aavin(The Tamilnadu co-op
allocations based on previous period‘s figures. Each project has milk producers’ federation Limited) procures milk from them were
to justify its existence first of all. That is, projects are evaluated stopping the milk collection from time to time without any prior
from the scratch. Then based on their evaluation and their notice.
relevance to current period, allocations are made. Aavin procures about 30.2 lakh litres milk per day across
Let us see the influence of food processing and preservatives the State, and there has been a spurt in the milk production of
in our daily life. Doctors coming in various TV channels advise late. Further, previous showers facilitated green fodder growth,
against fast food to avoid obesity. Various TV channels prepare which resulted in increased milk production. The farmers were
special clippings on the evil effects of fast food on human health. demanding setting up of more milk powder manufacturing units
One such recent clipping asked a pertinent question as to how to increase demand for milk.
the processed foods stand for months where as the food we In another situation of problem due to abundance, surplus
make in our home could not stand for more than few hours. The sugar stocks in the previous three sugar seasons led to an
adverse effects of chemicals that are added as preservatives were accumulated stock of 91.09 lakh tones as on 01.10.2014. It
highlighted. The clipping also objected to them a king of Ajino was reported that with the glut in production, farmers were on
moto in Tamilnadu which is used in food processing in spite of tenterhooks as to whether they would recover their input costs.
its harmful effects. There were huge arrears from sugar mills to farmers. The Union
Notwithstanding the fact that there is no recommended food government on 10.11.2015 approved a ` 6,000-crore interest-free
for yoga, it is said that those who do regular practice of yoga loan to the sugar industry to enable it to clear cane arrears to
resort to eating moderate and sattvic (serene, harmonious and farmers that were standing at ` 21,000 crore. The move, however,
balanced) food in due course. Thus they may prefer eating did not go down well with the industry body, Indian Sugar Mills
regional and seasonal food and may shy away from eating Association (ISMA), which said this did not address the basic
processed food! problem of surplus sugar and depressed prices. An office bearer
Nobody is fantasizing that food processing industry should be of ISMA contended, “To expect the industry to repay the loan
banished altogether. But to give special focus to that sector is after a year is expecting it to make profits to the tune of ` 6,000
contradictory to the wellness concept. Just as carbon emission crore within a year, which does not seem possible with a surplus
and climate change are matters of international concern now, stock of over 10 million tonnes and depressed sugar price”. With
processed food and health issues of mankind will come to the sugar prices falling in global markets, the government again came
forefront sooner than later. At that time even to print a warning to the rescue of local farmers, in the last week of April 2015, by
on the package isnot going to be easy. When an industry is hiking the import duty on sugar to 40 per cent from the existing
allowed to thrive then it will be very difficult to exercise restraint 25 per cent to discourage sugar imports. But the woes of farmers
over that later. Two examples can be given for this. In April 2015, continued and some distressed sugarcane growers destroyed
Government expressed its commitment to increase the size of their standing crop.
pictorial warnings on tobacco products to 85% as recommended Wheat is another produce facing the irony of import amidst
by World Health Organisation. But immediately it had to defer plenty in the local market.
the mandatory display of large pictorial health warning due to On the problem of plenty in buffer stocks, there was a news

‘Make in india’ is an initiative by government of india to encourage companies to manufacture
their products in india. The article aims at a constructive and critical evaluation of the initiative
through the eyes of a cost accountant. The initiative is becoming increasingly visible.
It is a special focus on select sectors. A broad focus and an integrated approach are needed.
Focusing on wellness and food processing industries together is not consistent. ZBB would not have
allowed this! On the other hand, the food processing industry had not apparently come to the rescue
of milk, sugar or food grains when they are facing the problems of plenty.
During problems of plenty in agriculture, they are consigned to mother earth. Problem of plenty in
industrial stocks is not affordable. It should be avoided by following the Japanese just-in-time (JIT)
manufacturing approach or equivalent approaches.
Strengthening educational standards will bring great results. ISO standards should be followed not
only in figures but in spirits too for real quality.
Let us make use of the opportunities being created by government and strive hard for realising our
dreams.
item in January 2015, that India was holding excess foodgrains economy and to generate employment there. Every country
stocks worth nearly `50,000 crore, over and above the stipulated thinks, “Let it be purchased anywhere. But it should be made
buffer limits. At close to 49 million tonnes, the stocks were more here”! “Who has the purchase power?” is another big question
than twice the norm, a former chairman of the Commission for in the current uncertain economic scenario in many countries.
Agricultural Costs and Prices (CACP) had told .He pointed out During problems of plenty in agriculture, they are consigned to
that reducing the buffer stocks was crucial to reduce storage mother earth making her feel sorry for the wastage of resources!
costs. But if industrial goods result in problem of plenty or in excess
Excerpts from the editorial in Financial Express on 19.05.2015 stocks, will not that dumping result in environmental degradation
: “Imagine the irony. India has 34 million tonnes of wheat stocks and make mother earth wild? Piling of stocks should be avoided
with the Food Corporation of India (FCI) already and another by following the Japanese Just-in-time (JIT) manufacturing
3-4 million will get added to this by July 1, but the country is still approach or equivalent approaches.
importing wheat, albeit in very small quantities. By July 1, FCI’s
wheat and rice stocks will cross 60 million tonnes as compared Return to the basics
to the buffer stock norm of 42 million—and even this is way too For making, money, men, material and methods are the four
high—which translates into an extra cost of around ` 45,000 most important Ms.
crore. Imagine what such funds could do for India’s irrigation Of the four Ms mentioned above men viz. manpower is an
sector! Given the plunge in global prices—by over $100 per tonne important factor. Education has not somehow found out a place
over the last one year—it is actually cheaper to import grain into in the focused sectors of Make in India. Perhaps the policy makers
India, at least in coastal regions, than it is to buy it from either FCI thought that plenty of educational institutions, graduates, post
or from the open market. ………… There are various problems that graduates, teachers, engineers, doctors etc. had already been
arise. Since the current procurement of around 25 million tonnes made! And now many educational institutions portray their ISO
of wheat by FCI has been damaged due to the unseasonal rain, status too. Consultants are abundant to prepare educational
it is not clear how much of this can be distributed through ration institutions to get ISO status. Many of the institutions do not
shops—if it has to be exported as cattle feed, this will also add hesitate to show other institutions’ library books and professors
considerably to FCI’s costs.” as their own. Considerable number of students come out from
these institutions with very high marks unheard of even two
Just-in-Time manufacturing approach will be helpful in decades back. But studies reveal that a high percentage of fresh
Make in India engineering graduates are not employable. And institutions boast
All countries (even if they are industrially developed) invite about their campus placement records irrespective of the time lag
other countries (even if they are still in developing status!) or the reduced scale of pay with which students get to join their
to make in the territories of the former to give a fillip to their employer. Yes, now Quality is measured in terms of Quantity.

M AK E IN IN DIA
‘State in measurable terms, viz numbers’ is the motto of ISO (if In Kamba Ramayanam (Tamil), Kambar cites the passion with
followed in letters)! Not to find fault with ISO standards, but they which a poor farmer would take care of and protect his small
should be followed in spirits too for real Quality. piece of land to illustrate king Dasaratha’s care for his kingdom.
Regarding the results of CTET conducted by CBSE in 2014,
there is a newspaper report saying, “The test, introduced to The quote is “ைய்்யகம் முழுைதும் ைறிஞன் ஓம்பும்
bring in national standards in recruitment of teachers for classes ஓர்செய்எனக் காதது இனிது அரசு செய்கிறான்”
I-VIII after the enactment of the Right of Children to Free and
Compulsory Education Act, 2009, has consistently thrown up low In Banking,‘acting in good faith and without negligence’is the
scores with the highest pass percentage hovering around 10-11 qualitative term which describes the discharge available to a
per cent, nationally. In the September test conducted by CBSE, paying bank.
nationally, 11.95 per cent of the candidates cleared Paper I, meant The figures oriented subject Economics is defined by Lionel
for teachers intending to teach classes I-V.In Paper II, meant for Robbins as “the science which studies human behaviour as a
those intending to teach classes VI-VIII, just 2.8 per cent of the relationship between ends (unlimited wants) and scarce means
candidates passed the muster nationally. Candidates have to (limited resources) which have alternative uses.”
score 60 per cent and above to get the eligibility certificate.” These are a few examples where qualities are comprehensively
In the CTET examinations conducted in February 2015, out felt through words.
of a total of 6,77,554 candidates who had appeared only 80,187 Let us make use of the opportunities being created by
candidates had qualified. The teacher eligibility tests conducted Government, visualise quality in heart and strive hard for realizing
by respective States are also consistently showing poor pass all our personal and national dreams. MA
percentage. Given the very poor pass percentage, it is obvious
that many new teachers are teaching without passing these References
tests. It makes one wonder why not a preliminary aptitude test is Details about Make in India makeindia.com supported by nic
conducted and later their course outcome is relied upon, instead Joint venture to produce helicopter The Hindu dated 03.07.2015
of testing their suitability and aptitude for teaching after spending
Assocham study The Hindu dated 03.08.2015
so much resources and time in the teacher training institutions.
PMI growth in July 2015 The Hindu dated 04.08.2015
Strengthening the standards of school and college education
in the real sense will produce development in leaps and bounds SIATI summit The Hindu dated 25.07.2015
in less than two decades. Text of Call for yoga http://mhrd.gov.in/yoga

Pictorial warning on tobacco The Hindu dated 02.04.2015
Collective and individual responsibility products
Just as periodic physical stock verification is necessary for Total prohibition allegedly not The Hindu dated 09.08.2014
feasible
industries, Government will also do well in taking stock of nation’s
resources, including its manpower, periodically. The existing Dairy farmers’ woes The Hindu dated 03.05.2015 and
28.05.2015
infrastructure can be strengthened. Coming back to Quality
Image of milk being poured on the metrovaartha.com
standards, numerical values may be necessary to articulate ground
them.But quality should be visualized and felt in the heart by
Sugarcane farmers’ woes The Hindu dated 03.05.2015,
the person responsible for the same. Our literature and subject 11.06.2015 and 15.06.2015
books have successfully expressed standards in words. Image of sugarcane crop being The Hindu dated 07.07.2015
For literary criticism, Greek philosopher Plato insisted on truth, destroyed
goodness and beauty as standards. Satyam, shivam andsundaram Food grains’ excess buffer stock The Hindu dated 19.01.2015
is the Indian equivalent of that hallmark. Yawning skill gap cause for concern The Hindu dated 21.01.2015
Expression of poetic standards of quality is obtained in ancient
Low scores in teacher eligibility The Hindu dated 15.10.2014 &
Tamil literature PuraNanooru. Poetess Avvaiyar makes us visualise tests India Today dtd 02.04.2015
how strong the leg of a chariot will turn out if it is concentrated
upon for a full month by a carpenter who is capable of making
eight chariots in a single day, the quote being “வைகல் எண்
தேர் செய்யும் ேசென் ேிஙகள் ைலிதே கால்”
which may be read in English as
“vaikalenntherseyyumthachanthingalvalitthakaal”
and she cites that strength to illustrate the vlaour of a soldier. [email protected]

Swachh Bharat Cess
- A critical analysis
Prime Minister Shri Modi ji has adopted the Swachh

Bharat Abhiyan as one of the primary goals of
his government that was aimed at improving the
CMA Subhash C Agrawal overall health and well-being of citizens of India.
Proprietor To ensure that Swachh Bharat Abhiyan will meet
Subhash Agrawal & Co., Delhi its desired goals, the government has introduced the
Former Director (Finance) Swachh Bharat Cess (SBC) for raising funds to meet
Cement Corporation of India Ltd. mission objectives.
According to economists, this cess also prepares the
ground for sudden jump in service tax rate under the
goods and services tax regime. The GST will bring
overall incidence of taxation down but tax rate on
services will inevitably have to go up.
This article discusses the provisions of SBC and its
S WA C H H B H A R AT C E S S
impact on cost of various services and products.
CMA Nagender Saini

Associate Cost Accountant
New World Trading India Pvt.Ltd
New Delhi
T
he Government of India has announced the people live in. The Prime Minister started an awareness
Swachh Bharat Cess (SBC) of .05% on all taxable on the need to maintain cleanliness and appealed people
services levied and collected with effect from 15 to give up open air defecation that has been a common
November 2015. The notification to this effect was issued practice in India on account of lack of toilets at home.
by the Government on 6 November 2015 vide Notification This was taken up on mission mode and backed by an
No 21/2015 – Service Tax, covering Swachh Bharat Cess, actionable plan to ensure that India build 12 crore toilets in
under Chapter VI (Section 119) of the Finance Act 2015. rural and urban areas, and ensure that India became free
from open air defecation and Swachh by 2019.
Origin of Swachh Bharat Cess (SBC) To ensure that Swachh Bharat Abhiyan will meet its
Prime Minister Shri Modi ji took office in May 2014, he desired goals, the government has decided to introduce
adopted the Swachh Bharat Abhiyan as one of the primary the Swachh Bharat Cess for raising funds to meet mission
goals of his government that was aimed at improving the objectives.
overall health and well-being of citizens. The mission was
formally launched on 2nd October 2014. Meaning and Purpose of Swachh Bharat Cess (SBC)
Health and hygiene directly impacts people’s lives but It is a cess which is levied and collected in accordance
have been given very little attention towards improving with the provision of chapter VI of the Finance Act, 2015,
personal hygiene and cleanliness in the surroundings that called Swachh Bharat Cess.

S WACH H BH ARAT CE S S
The purpose of SBC is enumerated below:- The Central government has implemented the provisions of
* To promote Swachh Bharat Initiatives. Swachh Bharat Cess (SBC) w.e.f. 15 November 2015 (Notification
* To Change people’s attitude and create awareness among No.21/2015-Service Tax).
people towards the importance of Governed and Management of Swachh Bharat Cess (SBC).
Cleanliness and good sanitation system. All SBC collected will be credited to the Consolidated Fund of India
* To introduce, modern and scientific municipal solid waste Account and the Central Government may, after due appropriation
management practices. made by Parliament, utilise such sums of money for Implementing
* For the betterment of Indian economy. the Swachh Bharat Abhiyan.
* To develop the rural areas by developing the sanitation Separate accounting code for Swachh Bharat Cess.
system. For payment of Swachh Bharat Cess, a separate accounting
* To prevent infectious diseases like Diarrhoea, Cholera, etc. code has been notified in consultation with the Principal Chief
* To construct toilets for community and houses to eliminate Controller of Accounts. These are as :-
open defecation.
Swachh
Benefit of SBC Imposed to promote Swachh Bharat Tax Other Deduct
Bharat Cess Penalties
Collection Receipts Refunds
In addition to clean India drive, SBC is expected to provide (Minor Head)
many benefits which include the following major areas:
HEALTH:
As per WHO report, every Indian is losing thousands of
0044-00-506 00441493 00441494 00441496 00441495
rupees every year on medical treatment attributed to unhygienic
conditions, which is a big financial loss to the people of India.
Swachh Bharat Mission will help in improving health and will
reduce this financial loss. Applicability and Rate of Swachh Bharat Cess (SBC)
PRODUCTIVITY: It is applicable on all taxable services at the rate of 0.5% of
Improvement in health will result into improvement in the value of taxable service. It is not leviable on Services which
productivity of every individual, and high productivity means are fully exempt from service tax or those covered under the
high earning. We hope a healthy India will soon be turned into a negative list of services.
developed nation. Please Note to:
FDI (FOREIGN DIRECT INVESTMENT): It is charged @ 0.5% on value of taxable service, not on
Foreign companies are shying away while investing in India service tax.
due to unhygienic conditions prevailing in the country. In today’s For Example :
scenario, our nation desperately needs ‘Foreign Direct Investment’. A Practising Cost Accountant firm issues invoice for cost
Hence, Swachh Bharat Mission will help in attracting FDI. audit to his client, then Swachh Bharat Cess (SBC) will be
TOURISM: calculated like cost audit fee Rs 2,00,000 + 14% on 2,00,000
Tourism is contributing about 6% to the national GDP and for service tax + 0.5% on 2,00,000 for Swachh Bharat Cess
providing about 8% of the total employment. India witness more (SBC). Gross Invoice Amount is Rs 2,29,000.
than 5 million annual foreign tourist arrivals and 562 million As regards Point of Taxation, since this levy has come for
domestic tourism visits. It supports about 40 million jobs in the first time, all services (except those services which are in
India. The sector is predicted to grow at an average annual rate the Negative List or are wholly exempt from service tax) are
of 8% till 2023 making India the third fastest growing tourism being subjected to SBC for the first time. SBC, therefore, is a
destination over the next decade. However as we all know, new levy, which was not in existence earlier. Hence, rule 5 of
cleanliness is a big hurdle in development of tourism. Foreign the Point of Taxation Rules would be applicable in this case.
tourists are very particular about cleanliness and hygienic Therefore, Swachh Bharat cess will not apply on those services
conditions. With its improvements, we can attract more foreign where payment has been received and invoice is raised before
travellers to India that will help in bringing foreign currency and the service becomes taxable, i.e. prior to 15th November, 2015.
employment in tourism sector, which will boost GDP of the nation. In cases where payment has been received before the service
became taxable and invoice is raised within 14 days, i.e. upto
Provisions Regarding Swachh Bharat Cess 29th November, 2015, even then the service tax liability does
not arise. Swachh Bharat Cess will be payable on services
Date of Implementation of Swachh Bharat Cess (SBC). which are provided on or after 15th Nov, 2015, invoice in

respect of which is issued on or after that date and payment Reversal of SBC is not required under Rule 6 of Cenvat Credit
is also received on or after that date. Swachh Bharat Cess will Rules, 2004.
also be payable where service is provided on or after 15th Nov, In respect of reverse charge mechanism, SBC liability is
2015 but payment is received prior to that date and invoice in determined in accordance with Rule 7 of Point of Taxation
respect of such service is not issued by 29th Nov, 2015. Rules, as per which, point of taxation is the date on which
No Swachh Bharat Cess on goods: consideration is paid to the service provider. Thus, SBC liability
SBC is levied under Chapter VI of the Finance Act, 2015 and in such case will be 0.5% x Value of taxable service.
is applicable only on provision of taxable services. Hence, No
SBC shall be imposed on the goods manufactured. Computation of tax on Restaurant and Outdoor catering
services:
SBC would be required to be mentioned separately in invoice In terms of Rule 2C of the Service Tax (Determination of
SBC would be levied, charged, collected and paid to Value) Rules, 2006, tax needs to be applied on the value so
Government independent of service tax. This need to be arrived at the rate of 14.5%. Accordingly, effective rate of tax
charged separately on the invoice after service tax, as a would be as under (SBC should be separately shown)
different line item. A) In case of Restaurant services: 5.8% (14.5%*40%); and
B) In case of Outdoor catering services: 8.7% (14.5%*60%)
Service Tax Provision Applicability On Swachh Bharat Cess
The Ministry clarified that all provisions including those Availability of Cenvat Credit of the SBC
related to computation of taxable value, assessment, SBC is not integrated in the Cenvat Credit Chain. Therefore,
exemption, payment, penalty, etc. applicable to service tax credit of SBC cannot be availed. Further, SBC cannot be paid
would apply to Swachh Bharat Cess, e.g. the Cess is payable by utilizing Cenvat credit of any other duty or tax.
on or before 6th of the following month if it is paid through
internet banking, or otherwise on or before 5th of the following Impact of SBC on cost of services:
month as that of service tax. All Services, except exempt and services in negative list,
are getting costlier after applicability of Swachh Bharat Cess,
Impact of SBC on services under reverse charge mechanism basically due to imposition of additional cess @ 0.5%, and
In case of reverse charge under section 68(2) of the Finance non availability of cenvat credit of SBC. Rather, there will be a
Act, 1994, the liability has been shifted from service provider to cascading effect of SBC on cost of services. Some of the day-
the service recipient. As per Finance Act, 2015 U/S 119 (5), the to-day services used by common man got costlier are given
provisions of Chapter V of the Finance Act, 1994, and the rules below:
made there under, are applicable to SBC also. But Remember
Restaurant bills, Eating out Banking Service – fund transfer, Credit Card, etc.
Telecommunication Service Insurance
Brokerage for transactions - buying and selling shares, fu-

Travel Service -Air Tickets, Railway Tickets, etc.
tures and options.
Outdoor catering Manpower recruitment agencies
Cinema, cable Beauty Parlour
Impact of Swachh Bharat Cess on Product Cost
Element of cost related to product

There are many cost elements in manufacturing of the products and distributing the same to final consumers, like Raw material,
Employee cost, depreciation and amortization, manufacturing overheads, administration overheads, selling & distribution overheads,
etc. There will be impact of Swachh Bharat Cess on each elements of cost involving services:
•Raw Material
The cost of material consumed will increase by the SBC on transportation, handling, loading & unloading, transit insurance, etc.

S WACH H BH ARAT CE S S
•Employee/ Labour cost separately in the books of account and needs to be paid
The companies employ manpower on its payroll and also hire separately under separate accounting code notified separately.
from the manpower agencies, like security guards, supporting The Industry is apprehensive that the cess is not in line with the
staff, packing labour, maintenance staff, etc. The Employee/ government’s plan to roll out the Goods & Services Tax (GST),
labour cost will increase on the manpower hired by the companies given that it is meant to subsume all surcharges and cesses.
from the Manpower recruitment agencies. If company does not Meanwhile, a new Cess by the name of Krishi Kalyan Cess has
hire any employee from the manpower recruitment agencies and also been proposed in the union budget, 2016, to be imposed from
employ all employees on its payroll, then employee cost will not 01.06.2016 @ 0.5% on value of all taxable services . (Chapter VI
be affected by Swachh Bharat Cess Clause 158 of Finance Bil, 2016). Input credit of Krishi Kalyan
•Manufacturing overheads Cess paid on services shall be allowed to set-off against output
The manufacturing overheads involving provision of services cess.
procured from outside will increase due to applicability of SBC,
like job work done from outside, repair and maintenance work, Conclusion
etc. Swachh Bharat Cess is a good step taken by the government
•Administration overheads towards fulfilling the Swachh Bharat Abhiyan, if it is properly
The Administration overheads will increase due to SBC like implemented. However, most of the services cost will be increased
Telecommunication Service, Insurance, housekeeping work, Travel by 0.5%, and product cost shall also be increased, thereby
Service -Air Tickets, Railway Tickets, etc. ultimate consumer will suffer from Swachh Bharat Cess.
•Selling and Distribution overheads On the one hand, cess by the name of education cess was
Most of the Selling and Distribution overheads will increase abolished and service tax rate was increased from 12% to 14%,
due to SBC like goods transport services, railway freight, handling, and on the other hand Government has imposed another cess
loading & unloading, etc. used for distribution of the products in the form of Swachh Bharat Cess. One more cess i.e. Krishi
in market. Further, travel cost of sales staff and commission of Kalyan Cess @ 0.5% has been proposed in the Union Budget
selling agents shall also be got costlier. 2016-17 on all taxable services to finance and promote initiatives
to improve agriculture and welfare of farmers. On the one hand
Impact on Product Cost the country is waiting for GST, which will do away with multiplicity
Since the Companies cannot get Cenvat credit for this cess, and of taxes, and on other hand Govt. is imposing multiple cess. The
they have to pay to their service providers, the SBC will have to efficacy of Education cess has not yet proved, it is to be seen
be absorbed in the product costs resulting in increase of costs, whether imposition of Swachh Bharat Cess will be a Panacea for
and the overall impact of SBC will be inflationary on the economy. making Bharat Swachh, or a Money Spinner for Government
and additional tax burden for common man. MA
Revenue from Swachh Bharat Cess
The Government is collecting good Revenue from Swachh References
Bharat cess. *www.cbec.gov.in
The revenue estimated to be collected Between November *www.kpmg.com
15, 2015 and March 31, 2016, is about Rs. 3,750 crore. The *pib.nic.in/new site/printrelease.asp
government has collected Rs. 329.6 crore in a month’s time from *www.hindustantimes.com
the date of imposition of 0.5 per cent Swachh Bharat cess on all *www.profitbooks.net
taxable services *www.arthapedia.in
*www.thehindu.com
Reaction of Industry *www.moneycontrol.com
The industries, Businesses and other stakeholders are not *www.yourstory.com
feeling well with Swachh Bharat Cess. They are feeling ‘aswasth’ *www.ketking.com
due to the Swachh Bharat cess. Indian industry hasn’t taken *www.Tutorialspoint.com
too kindly to the imposition of a cess to help fund the Swachh
Bharat initiative. The companies haven’t been given enough time
to implement the levy and it goes against the government’s push
to improve ease of doing business. The eight day’s notice was
too short for implementation of a new tax. The SBC needs to [email protected]
be charged separately on the invoice, needs to be accounted

भारत इले� �ािन�स िलिमटे ड
(र�ा मं�ालय के अधीन भारत सरकार का उ�यम)
CIN: L32309KA1954GOI000787
BHARAT ELECTRONICS LIMITED
(A Govt of India Enterprise under the Ministry of Defence)
Outer Ring Road, Nagavara,

Bangalore – 560 045
Ph: 2503 9284, Fax: 2503 9233
Bharat Electronics Limited a Navaratna company , under Ministry of Defence, requests quotes
from eligible Cost Accountant firms for selection as Cost Auditor for the Financial Year 2016-17
for conducting Cost Audit as per provisions of the Companies Act, 2013.
For further details of Request for Quote (RFQ) please refer our website: www.bel-india.com
[click on Tender tab & select “Corporate”]
13 April 2016
NOTICE
13 April 2016
Extension of time for CEPNOTICE

Credit Hours for renewal of COP
Dear Members, Extension of time for CEP Credit Hours for renewal of 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
As you are aware
Programme, that in casetoofundergo
it is mandatory members holding mandatory
minimum Certificate Of Practice
training (COP),
of 15 hoursasper
per year
the
Guidelines
commencing forfrom 1st AprilTraining
Mandatory to 31st March.
for allIfMembers
the COP of members
The Institute under
is not Continuing
renewed Education
for the year 2016-
Programme,
17 owing toit shortfall
is mandatory
in CEPto hours,
undergo minimum
it might mandatory
cause hardship training
to thoseofmembers
15 hourswho
per thrive
year
commencing
exclusively on 1st April notwithstanding
frompractice to 31st March. If the
the COP
fact ofthat
members is not renewed
compliance for the year
of prescribed 2016-
minimum
17 owing toofshortfall
requirement CEP hoursin isCEP hours, for
mandatory it renewal
might cause hardshipoftoPractice.
of Certificate those members who thrive
exclusively on practice notwithstanding the fact that compliance of prescribed minimum
requirement of CEP
In view of the hours
above, mandatory
it is decided byfor
therenewal of of
Council Certificate of Practice.
the Institute to grant an extension upto
30th June 2016 to complete the requirement of CEP credit Hours for renewal of COP of the
In view offor
members thethe
above,
year it is decided by the Council of the Institute to grant an extension upto
2016-17.
30th June 2016 to complete the requirement of CEP credit Hours for renewal of COP of the
members for the year 2016-17.
Kaushik Banerjee
(Secretary)
Kaushik Banerjee
(Secretary)

C O S T A U D I T I N G S TA N D A R D S
2015:
1. Cost Auditing Standard-101 on Planning an audit of
Cost Statements;
2.Cost Auditing Standard-102 on Cost Audit
Documentation;
3. Cost Auditing Standard-103 on Overall objectives
of the independent cost auditor and the Conduct
CMA J K Budhiraja of an Audit in Accordance with Cost Auditing
Senior Director (Technical) Standards; and
The Institute of Cost Accountants of India 4. Cost Auditing Standard-104 on Knowledge
of business, its processes and the business
environment
How Standards on Cost Auditing are formulated?
T
he Companies (Cost Records and Audit) Rules Standards on Cost Auditing are issued by the Cost
2014 notified by the Ministry of Corporate Auditing & Assurance Standards Board (CAASB) under
Affairs, Government of India on 30th June 2014, the authority of the Council of the Institute of Cost
amended on 31st December 2014 provide that the auditor Accountants of India.The Cost Auditing and Assurance
conducting the audit of cost records maintained under Standards Boardhas been set up by the Council of the
section 148 of the Companies Act 2013 shall comply with Institute, entrusting withthe responsibility to formulate
the cost auditing standards. Standards on Cost Auditing and Assurance and develop
Sub-section (3) of section 148 of the Companies Act guidance notes in the area of audit of cost records &
2013 gives the following explanation: related services and quality control.
Explanation.—For the purposes of this sub-section, the The Council of the Institute on the recommendation of
expression “cost auditing standards” mean such standards the Cost Auditing & Assurance Standards Board (CAASB)
as are issued by the Institute of Cost Accountants of has decided to rename “cost auditing standards” to
India, constituted under the Cost and Works Accountants “Standards on Cost Auditing- SCA”. Now standards to
Act, 1959, with the approval of the Central Government. be issued by the CAASB shall be known with the said
The Central Government vide letter dated 10th September nomenclature.
2015 has approved the following 4 cost auditing standards While formulating the Standards, the CAASB takes into
which are effective for audit on or after 11th September consideration the applicable laws, usage and business

environment prevailing in India. CAASB also takes into account In addition, the President is authorised to include a maximum
the relevant provisions of Cost and Works Accountants Act, Rules of two eminent persons having relevant knowledge and expertise
and Regulations, Code of Professional Ethics, Cost Accounting not falling under the categories mentioned above.
Standards and other Statements issued by the Institute of the The President and Vice President of the Institute of Cost
Cost Accountants of India. The Standards issued by the CAASB Accountants of India are ex-officio members of CAASB.
are aligned, to the extent possible, with other recognised
Standards issued in India and prevailing International Practices. Procedure to issue Standards on Cost Auditing
If a particular standard or any part thereof is inconsistent with a As per the laid down procedure defined under preface to
law, the provisions of the said law shall prevail. CAASB hosted on the Institute website, which is consonance with
Standards formulated by the CAASB include paragraphs in the International Auditing & Assurance Standards Board of IFAC,
bold italic type and plain type, which have equal authority. the issue of any standard takes a minimum of 3 to 4 months. The
Paragraphs in bold italic type indicate the main principles. Each steps involved are preparation of first draft; consideration of draft
Standard should be read in the context of the objective stated in by the Board; exposure of the approved draft for stakeholders’
that Standard and the Preface to CAASB which is available on the comments for a minimum period of 30 days; consideration of
Institute website. Any limitation on the applicability of a specific comments by the Board; approval by the Board with or without
Standard is made clear in the Standard itself. amendments; followed by consideration & approval by the
Pending development of the Standards on Quality Control, the Council of the Institute.
Guidance Manual for Audit Quality issued by the Institute of Cost
Accountants of Indiawill prevail in respect of all services rendered Structure of Standards on Cost Auditing
by the Cost Accountants. Each Standard generally follows the following structure. In case
of deviation, suitable explanation is provided by the Task Force /
International standards on auditing (ISAs) vis-à-vis stand-
Study Group preparing the Standard.
ards on cost auditing (SCAs)
1. Introduction
The Institute of Cost Accountants of India is a founder member 2. Objectives
of the International Federation of Accountants (IFAC). The 3. Scope
International Auditing and Assurance Standards Board (IAASB) 4. Definitions
established under the authority of the IFAC have issued series of 5. Requirements
International Standards on Auditing (ISAs), which primarily focus 6. Application and other explanatory material
on the financial audit. As we know that there are fundamental 7. Effective date
differences between the scope and methodology of financial and 8. Statement of modifications
cost audit, it shall not be appropriate by the CAASB to adopt in The above headings except heading at serial numbers 8 do
full or with modifications the International Standards on Auditing not need explanation.As mentioned above that the standards
issued by the IAASB. However in formulating the standards, the on cost auditing are formulated by CAASB in consonance
CAASB will ensure that the framework and other aspects of the with the International Auditing & Assurance Standards Board
International Standards are considered, to the extent relevant of IFAC,which primarily focus on the financial audit, there are
and applicable to cost audit. fundamental differences between the scope and methodology
of financial and cost audit. Therefore, the Standards which
Composition of the CAASB are being issued by the Institute contain the “Statement
The composition of the CAASB is broad based to ensure of Modifications” in comparison to International Auditing
participation of all interest groups in the standard setting process. Standards.
Apart from six members of the Council of the Institute nominated Is there any difference between Cost Accounting Stand-
in the CAASB, the following are also represented on the CAASB: ards (CASs) and Standards on Cost Auditing (SCAs)?
1. Head, Cost Audit Branch, Ministry of Corporate Affairs,
Government of India Many members of the Institute enquire why the Standards
2. One member to be nominated by the Comptroller & Auditor on Cost Auditing (SCAs) are being issued by the Institute when
General of India the Institute has already issued Cost Accounting Standards
3. Two members to be nominated by the Regulatory bodies (CASs). “Cost Accounting standards- CASs” are guidelines for the
4. Two eminent members of the Institute in Public Practice companies that specify the cost accounting treatment for various
5. Two members representing Industry / Industry Associations cost elements, minimum disclosure requirements and ensure the
/ Professional Institutes comparability, consistency, and completeness of cost records.

CO S T AU DIT IN G S TAN DARDS
Whereas the “Standards on Cost Auditing- SCAs” prescribe the materials, labour and plant, maximize production and realize
norms of principles and practices, which the Cost Auditors are greater profits. Data provided after cost audit helps analysis
expected to follow in the conduct of cost audit. They provide which is useful to the Regulators of public utilities and provide
minimum guidance to the cost auditor that helps determine the a basis for comparing claims and assessing the validity of issues
extent of auditing steps and procedures that should be applied arising out of international trade.
in the cost audit and constitute the criteria or yardstick against In view of importance of quality audit, the Government
which the quality of audit results are evaluated. SCAs aim to of India, Ministry of Corporate Affairs, on 3rd October 2007
improve the auditing practices and provide a framework for the constituted a “Quality Review Board (QRB)” of the Institute of
auditing steps and procedures. Conducting audit in accordance Cost Accountants of India for promoting “Quality” considerations
with standards gives necessary assurance to stakeholders in rendering various professional (both statutory and non-
making use of the cost statements and cost auditor’s reports. statutory) services by the members of the Institute of the Cost
Accountants of India. The Quality Review Board has a clear
Why are Cost Auditing Standards required? and earmarked function to raise the level of performance of
Question is why quality audit of cost statements is important? the professionals to meet the demands of corporate India. The
Quality audits are important not only to the effective functioning Quality Review Board of the Institute issued a “Guidance Manual
of financial markets, but also to the effective operation, for Audit Quality” which is a significant attempt to improve the
monitoring and efficient use of the scarce resources of quality of the CMA professionals.
enterprises. The purpose of an audit is to provide reasonable How many Standards on Cost Auditing have been issued
assurance that an entity’s cost statements present the true by CAASB?
and fair view of the cost of production or cost of operations,
cost of sales and margin for each of its products and activities As mentioned above that the standards on cost auditing can
for every financial year on monthly or quarterly or half-yearly be issued by the Institute only after approval of the Central
or annual basis and in accordance with the applicable cost Government as provided in explanation to sub-section 3 of
reporting framework are free of material misstatements due section 148 of the Companies Act 2013. The position of the
to fraud or error. Cost Audit tends to increase the credibility standards on the cost auditing as on date are as follows:
of cost statements and help to improve efficiency in the use of
Position of Standards on Cost Auditing (SCAs) vis-à-vis International Standards on Audit (ISAs)
SCAs issued by the Institute of Cost

S. No. ISAs issued by IAASB of IFAC Remarks
1 ISA 300, Planning an Audit of Finan- SCA 101- “Planning an Audit of Cost Approved by Central Government
cial Statements Statements” effective from 11th September 2015
2 ISA 230, Audit Documentation SCA 102 –“Cost Audit Documentation” Approved by Central Government
effective from 11th September 2015
ISA 200, Overall Objectives of the

SCA 103 –“Overall Objectives of the Indepen-
Independent Auditor and the Con- Approved by Central Government
3 dent Cost Auditor and the Conduct of an Au-
duct of an Audit in Accordance with effective from 11th September 2015
dit in Accordance with Standards on Auditing”
International Standards on Auditing
4 ISA 315, Identifying and Assessing SCA 104- “Knowledge of Business, its Process- Approved by Central Government
the Risks of Material Misstatement es and Business Environment” effective from 11th September 2015
through Understanding the Entity
and Its Environment
5 ISA 210, Agreeing the Terms of Audit SCA 105- “Agreeing the Terms of Cost Audit Sent to Ministry of Corporate Affairs,
Engagements Engagements”, approved by the Council Government of India for approval
6 ISA 530, Audit Sampling SCA 106 –“Audit Sampling”, approved by the Sent to Ministry of Corporate Affairs,
Council Government of India for approval
7 ISA 500, Audit Evidence SCA 107- “Audit Evidence”, approved by Sent to Ministry of Corporate Affairs,
ISA 501, Audit Evidence-Specific Con- Council Government of India for approval
siderations for Selected Items

SCAs issued by the Institute of Cost
S. No. ISAs issued by IAASB of IFAC Remarks
8 ISA 320, Materiality in Planning and SCA 108- “Materiality in Planning and Per- Sent to Ministry of Corporate Affairs,
Performing an Audit forming a Cost Audit”, approved by Council Government of India for approval
9 ISA 240, The Auditor’s Responsibili- SCA 109- “Cost Auditor’s Responsibility relat- Sent to Ministry of Corporate Affairs,
ties Relating to Fraud in an Audit of ing to Fraud in an Audit of Cost Statements”, Government of India for approval
Financial Statements approved by Council
10 ISA 580, Written Representations SCA 110- “Written Representations”, approved

by CAASB. Sent to Council for approval
11 ISA 450, Evaluation of Misstatements SCA-111 “Evaluation of Misstatements iden-

Identified during the Audit tified during the Cost Audit”, approved by
CAASB. Sent to Council for approval.
12 ISA 520, Analytical Procedures SCA-112“Analytical Procedures”, approved by
CAASB in February 2016. Sent to Council for
approval.
13 ISA 610, Using the Work of Internal SCA- 113 “Using the Work of Internal Audi-
Auditors tors”, approved by CAASB in February 2016.
Sent to Council for approval.
14 ISA 620, Using the Work of an Audi- SCA-114“Using the Work of an Auditor’s
tor’s Expert Expert”, approved by CAASB in February 2016.
Sent to Council for approval.
15 ISA 260, Communication with Those SCA- 115 “Communication with Those Charged
Charged with Governance with Governance”, approved by CAASB in Feb-
ruary 2016. Sent to Council for approval.
16 ISA 265, Communicating Deficiencies SCA-116“Communicating Deficiencies in

in Internal Control to Those Charged Internal Control to Those Charged with
with Governance and Management Governance and Management”, approved by
CAASB in February 2016. Sent to Council for
approval.
17 ISA 330, The Auditor’s Responses to “SCA- 117 “Cost Auditor’s Responses to As-
Assessed Risks sessed Risks”being approved by CAASB in its
March 2016 meeting.
18 ISA 315, Identifying and Assessing SCA-118 “Identifying and Assessing the Risks It may be noted that other part of
the Risks of Material Misstatement of Material Misstatement”, being approved by ISA 315 “through understanding the
through Understanding the Entity CAASB in its March 2016 meeting. Entity and its Environment” has been
and Its Environment covered in SCA-104 “Knowledge of
Business, its Processes and Business
Environment”
19 ISA 550, Related Parties SCA-119“Related Parties”, being approved by
CAASB in its March 2016 meeting.
Brief description of standards on cost auditing

Before, a brief about the standards on the auditing is given, it is emphasised that understanding of each standard is necessary. Each
word and sentence of the standard should be read carefully. In the first instance the user may feel that the language of the standards
is very difficult but reading again and again will help in understanding the intent of the standard properly. In most of the cases, the
cost audit is done by audit team comprising the professional and non- professionals, it is suggested that the Audit Team engaged for
cost audit should familiarize and have proper understanding of the requirements of the standards. It is needless to mention that the
standards on cost auditing will help the auditors to plan, perform and to obtain reasonable assurance about whether the cost state-
ments as a whole are free from material misstatement, whether due to fraud or error, and to enable the cost auditor to express an
opinion in accordance with the applicable Cost reporting framework, Cost Accounting Standards(CAS) and Generally Accepted Cost
Accounting Principles (GACAP) as issued by the Institute, and give a true and fair view of the cost of a product, activity or service.

1.SCA 101- Planning an Audit of Cost Statements (ii) Audit programs

Planning an audit of cost statements, records and other related Example: Audit Program for Material Cost, Employee Cost and
documents is considered necessary to ensure achievement others
of audit objectives with available resources and securing (iii) Analysis
coordination with the auditee on audit work. Planning also helps Cost Audit relies more on analytical review than on substantive
the cost auditor to perform in an efficient and effective manner. testing to establish true and fair view.
Audit planning shall also include establishing the overall audit Example: Calorific value of different fuels used and average
strategy and audit plan for the conduct of the audit. Cost per unit of calorific value and Specific Heat Consumption.
Before planning, the cost auditor is to ensure that appointment (iv) Audit Query List
as auditor are proper and legal formalities, ethical requirements, Contains a log of audit queries raised and their resolution
understanding of the terms of reference including the units to be (v) Abstracts of significant contracts relating to costs and
covered, products/services to be covered, and scope of coverage revenues
have been properly understood by him. Example: Supply of materials indicating price, quality terms,
The nature and extent of planning activities will vary according O & M contracts, Terms of supply of contract labour and others
to (a)size and complexity of the entity’s activities, the number of (vi) Letters of confirmation
products to be covered, the processes and operations involved; Example: Stock of materials with subcontractors.
(b) the audit team members’ previous experience with the entity (vii) Letter of Representation from Management
and the industry and (c) changes in circumstances that occur Correspondence (including e-mail) concerning significant
during the audit. matters.
Planning also helps the cost auditor in the risk assessment Example: Correspondence regarding terms of supply of goods
procedures. However, planning the nature, timing and extent and services.
of specific further audit procedures depends on the outcome of (viii) Abstract or copies of the entity’s records
those risk assessment procedures.
3. SCA 103-Overall Objectives of the Independent Cost
2. SCA 102- Cost Audit Documentation Auditor and the Conduct of an Audit in Accordance with
In order to have proper evidence that the audit was planned Cost Auditing Standards
and performed in accordance with Cost Auditing Standards and This Standard deals with the overall objectives of the
applicable legal & regulatory requirements, documentation is very independent cost auditor, the nature and scope of a cost
much necessary for the cost auditor. The standards prescribes audit, the independent auditor’s overall responsibilities when
that the Cost Auditor shall prepare audit documentation that is conducting an audit of cost statements in accordance with Cost
sufficient to enable another competent person, having no previous Auditing Standards. The cost auditor is to obtain reasonable
connection with the said audit, including person undertaking peer assurance about whether the cost statements as a whole are
review to understand: free from material misstatement, whether due to fraud or error,
(a) Conformance of audit procedures performed with legal and to enable the auditor to express an opinion whether the
and regulatory requirements; Cost Statements are prepared, in all material respects, in
(b) Conformance to Cost Auditing Standards; accordance with the applicable Cost reporting framework,
(c) The results of audit procedures performed; Cost Accounting Standards(CAS) and Generally Accepted Cost
(d) The audit evidence obtained; Accounting Principles (GACAP) as issued by the Institute of the
(e) Significant matters arising during the audit, the Cost Accountants of India, and give a true and fair view of the
conclusions reached thereon, and significant professional Cost of a product, activity or service. Standard mentions that
judgments made in reaching those conclusions. “the provision of services for maintenance of cost records, design
The Cost Audit documentation will usually contain: and implementation of Cost Systems and internal audit are
(i) Checklists considered to erode the independence of cost auditor”.
Example: Checklist of compliance with:- Further, the cost auditor is to report on the cost statements
(1) The Rules, regarding maintenance of Cost Records, as in the form required by law or by the Cost Auditing Standards
prescribed under the Companies Act, in accordance with the auditor’s findings. Where reasonable
(2) The Cost Accounting Standards (CAS) as prescribed by assurance cannot be obtained, the cost auditor should qualify
the Institute the opinion and in extreme cases disclaim an opinion. The Cost
(3) The Generally Accepted Cost Accounting Principles Auditors objective may extend to making observations and
(GACAP) as prescribed by the Institute suggestions where required by applicable regulations.

A cost auditor cannot obtain absolute assurance because there of the client’s business to enable him to understand the processes
are inherent limitations in an audit that affect the cost auditor’s and express his opinion on the cost statements.
ability to detect material misstatements. These limitations result The cost auditor’s level of knowledge for a cost audit
from factors such as: (1) the use of sample testing; (2) the inherent engagement should include a general knowledge of the economy
limitations of internal control (for example, the possibility of and the industry within which the entity operates, and a more
management override or collusion); (3) the fact that most audit particular knowledge of how the entity operates.
evidence is persuasive rather than conclusive. The cost auditor should obtain an understanding of the
Also, the work undertaken by the cost auditor to form an audit following:
opinion is permeated by judgment, in particular regarding: (a) The nature of the entity, (including its operations covering
(1) the gathering of audit evidence, for example, in deciding Business processes, major inputs, Joint & By-Products
the nature, timing and extent of audit procedures; and and Wastages and major outputs etc) and the entity’s
(2) the drawing of conclusions based on the audit evidence ownership and governance structure.
gathered, for example, assessing the reasonableness of (b) Relevant industry, regulatory, and other external factors
the estimates made by management in preparing the including the applicable cost and financial reporting
Cost Statements. framework.
The cost auditor shall exercise professional judgment in (c) The entity’s selection and application of cost accounting
planning and performing the audit. He shall plan and perform an policies.
audit with an attitude of professional scepticism. (d) The measurement and review of the entity’s performance.
Professional Judgment: The application of relevant training, In addition to above the cost auditor is also required to obtain
knowledge and experience, within the context provided by cost an understanding of internal controls, Control Environment,
auditing standards, cost accounting standards and ethical risk assessment process, Identifying business risks, assessing
requirements, in making informed decisions about the courses the likelihood of their occurrence, estimating the significance
of action that are appropriate in the circumstances of the audit of the risks and deciding about actions to address those risks
engagement. relevant to the audit. He shall also understand the IT (Information
Professional skepticism: An attitude of professional skepticism Technology) Environment and Control system of the entity.
means the cost auditor makes a critical assessment, with a
questioning mind, of the validity of audit evidence obtained and 5. SCA 105- Agreeing the Terms of Cost Audit Engagements
be alert to audit evidence that contradicts or brings into question This Standard deals with the cost auditor’s responsibilities
the reliability of documents and responses to inquiries and other in agreeing the terms of the cost audit engagements with
information obtained from management and those charged with management. This includes establishing that certain preconditions
governance. for cost audit rest with management. This standard deals with
An attitude of professional skepticism is necessary throughout those aspects of engagement acceptance that are within the
the cost audit process for the auditor to reduce the risk of control of the cost auditor.
overlooking unusual circumstances, of over generalizing when In order to establish whether the preconditions for cost audit
drawing conclusions from cost audit observations, and of are present, the cost auditor shall:
using faulty assumptions in determining the nature, timing a) Determine whether the cost reporting framework to be
and extent of the cost audit procedures and evaluating the applied in the preparation of the cost statements is
results thereof. When making inquiries and performing other acceptable; and
cost audit procedures, the cost auditor should not be satisfied b) Obtain the agreement from management that it
with less-than-persuasive audit evidence based on a belief that acknowledges and understands its responsibility:
management and those charged with governance are honest and i) For preparation and presentation of cost statements in
have integrity. Accordingly, representations from management accordance with applicable cost reporting framework
are not a substitute for obtaining sufficient appropriate audit that gives true and fair view of cost of production or cost
evidence to be able to draw reasonable conclusions on which to of operations, cost of sales, and margin for each product
base the cost auditor’s opinion. or service or activity, produced or provided by the entity
for the period under audit;
4. SCA 104- Knowledge of Business, its Processes and the ii) For selection and consistent application of appropriate
Business Environment cost accounting policies;
In performing an audit of cost statement, records and other iii) For implementation of cost accounting standards issued
related documents, the cost auditor should have the knowledge by the Institute, alongwith proper explanation relating

to any material departures from those cost accounting sampling, tolerable rate of deviation, tolerable misstatement,
standards; designing of test of control and test of details and stratification.
iv) For such internal control as management determines is This standard also explains that if the cost auditor is unable
necessary to enable the preparation of cost statements to apply the designated cost audit procedures, or suitable
that are free from material misstatement, whether due to alternative procedures, to a selected item, the cost auditor shall
fraud or error; and treat that item as a deviation from the prescribed control, in the
v) To provide the Cost Auditor with: case of tests of controls, or a misstatement, in the case of tests
a) Access, at all times, to all information, including the of details. The cost auditor shall also ensure that use of audit
books of accounts, vouchers, cost records, other records, sampling has provided a reasonable basis for conclusions about
documents, and other matters of the company, whether the population tested and thereby shall evaluate the results
kept at the head office of the company or elsewhere, derived from sample tested.
of which management is aware that is relevant to the This standard also provides appendices to enable the cost
preparation of the cost statements; auditor to select samples on the basis of principal methods i.e.
b) Additional information that the cost auditor may request random selection, systematic selection, monetary unit sampling,
from management for the purpose of the cost audit; and haphazard selection and block selection.
c) Unrestricted access to persons within the entity from
whom the cost auditor determines it is necessary to SCA 107- Audit Evidence
obtain cost audit evidence. The objective of this standard is to enable the cost auditor
Cost Reporting Framework:Cost Reporting Framework to design and perform cost audit procedure in such a way to
means the framework adopted by the management and, obtain sufficient appropriate audit evidence to be able to draw
where appropriate, by those charged with governance, in the reasonable conclusion on which cost auditor’s opinion is based.
preparation of the cost statements that is acceptable in view of “Sufficiency (of audit evidence)” is the measure of the
the nature of the entity and the objective of the cost report, or quantity of audit evidence. The quantity of the audit evidence
that is required by law or regulation. needed is affected by the cost auditor’s assessment of the risk
of material misstatement and also by the quality of such audit
6. SCA 106- Audit Sampling evidence.
This standard provides guidance on the use of audit sampling The cost auditor shall determine means of selecting items for
and other means of selecting items for testing the samples from testing that are effective in meeting the purpose of cost audit
the large population when designing the cost audit procedures to procedures, when designing tests of controls and tests of details
gather audit evidence in performing cost audit. It also provides for obtaining audit evidence.
the pre-requirements for the use of audit sampling methods Audit evidence to draw reasonable conclusions that is used by
(i.e.) statistical and non-statistical sampling and practical the cost auditor to form his opinion, is obtained by performing:
application guidance on selection of audit sample from large (i) Risk assessment procedures; and
population, performing test of controls and tests of details to (ii) Further cost audit procedures, which comprise:
develop reasonable basis for cost auditor to draw conclusion and a) Tests of controls, and
evaluation of results derived from the audit sampling. b) Substantive procedures, including tests of details and
“Audit Sampling”is an application of audit procedure to less substantive analytical procedures.
than 100% of items within a population of audit relevance such This standard also requires that cost auditor shall ensure
that all sampling units have a chance of selection in order to the relevance and reliability information gathered internally
provide the Cost Auditor a reasonable basis to draw conclusions or produced by management expert’s to obtain sufficient
about the entire population. appropriate audit evidence.
“Population”is the entire set of data from which a sample Substantive procedures are intended to create evidence that
is selected and about which the cost auditor wishes to draw an auditor assembles to support the assertion that there are no
conclusions. material misstatements in regard to the completeness, validity,
“Stratification” is the process of dividing a population into and accuracy of the cost records of an entity. Thus, substantive
sub-population, each of which is a group of sampling units which procedures are performed by an auditor to detect whether there
have similar characteristics (often monetary value). are any material misstatements in transactions. It comprises of:
The requirements of this standard is to consider purpose of i) Tests of details (of classes of transactions, account
the cost audit procedures and the characteristics of population, balances, and disclosures); and
sample size, selection of audit sampling, evaluation of audit ii) Substantive analytical procedures.

Substantive analytical procedures are types of analytical material misstatement, either caused by error or fraud. Owing to
procedures being used as a substantive procedure to obtain the inherent limitations of an audit, there is an unavoidable risk
evidence about particular assertions related to account balances that some material misstatements of the cost statements may
or classes of transactions. not be detected, even though the audit is properly planned and
Tests of controls:At the assertion level certain audit performed in accordance with the Standards on Cost Auditing.
procedures are designed in preventing, detecting and correcting, When obtaining reasonable assurance, the cost auditor is
material misstatements to evaluate the operating effectiveness responsible for maintaining professional skepticism throughout
of controls. the audit, considering the potential for management override
of controls and recognizing the fact that audit procedures that
8. SCA 108- Materiality in Planning and Performing a Cost are effective for detecting error may not be effective in detecting
Audit fraud. The requirements in this Standard on Cost Auditing are
This standard deals with the cost auditor’s responsibility to designed to assist the cost auditor in identifying and assessing
apply the concept of materiality in planning and performing audit the risks of material misstatement due to fraud and in designing
of cost statements, cost records and other related documents. procedures to detect such misstatement.
This standard explains how materiality is applied in evaluating
the effect of identified misstatement on the cost audit and of 10. SCA110- Written Representations
uncorrected misstatement, if any, on the cost statements, cost This Standard provides guidance to obtain written
records and other related documents. representations from management as audit evidence, the
The cost auditor’s determination of materiality is a matter procedures to be applied in evaluating and documenting written
of professional judgment, and is affected by the cost auditor’s representation, and the actions to be taken if management
perception of the cost information needs of users of the cost refuses to provide appropriate representations.
statements. Although written representations provide necessary audit
The concept of materiality is applied by the cost auditor both evidence, they do not provide sufficient appropriate audit
in planning and performing the cost audit, and in evaluating the evidence on their own about any of the matters with which
effect of identified misstatements on the cost statements and in they deal. Furthermore, the fact that management has provided
forming the opinion in the cost auditor’s report. reliable written representations does not affect the nature or
The cost auditor shall revise the established materiality level or extent of other audit evidence that the cost auditor obtains about
levels for the cost statements as a whole (and, if applicable, the the fulfilment of management’s responsibilities, or about specific
materiality level or levels for particular items of cost) in the event assertions.
of becoming aware during the audit that would have caused the The cost auditor shall request management to provide a
cost auditor to have determined different level or levels initially. written representation that it has fulfilled its responsibility for
Misstatement:A difference between the amounts, the preparation of the cost statements in accordance with the
classification, presentation or disclosure of a reported cost applicable cost reporting framework, including, where relevant,
statement item and the amount, classification, presentation, or their true and fair presentation, as set out in the terms of the
disclosure that is required for the item to be in accordance with cost audit engagement. Management written representation
the applicable cost reporting framework. Misstatements can provides that “It has provided the cost auditor with all relevant
arise from error or fraud. information and access as agreed in the terms of the cost audit
engagement; and all transactions have been recorded and are
9. SCA 109- Cost Auditor’s Responsibility relating to Fraud reflected in the cost statements”.
in an Audit of Cost Statements The Appendix attached to this standard provides “Illustrative
This Standard deals with the cost auditor’s responsibilities Representation Letter” from Management and will be very much
in understanding, differentiating misstatements with fraud, its helpful to cost auditors to obtain the written representation from
detection, and reporting it to the concerned authorities in case the management for the items listed in this Appendix.
any fraud is detected in the audit of cost statements.
The primary responsibility for the prevention and detection 11. SCA111- Evaluation of Misstatements identified during
of fraud rests with both management and those charged with the Cost Audit
governance of the entity. This Standard assists the cost auditor in evaluating the
A cost auditor conducting an audit in accordance with misstatements identified during the audit. The standard requires
Standards on Cost Auditing is responsible for obtaining reasonable cost auditor to assess whether an individual misstatement
assurance that the cost statements taken as a whole are free from or aggregate of misstatements approaches materiality; if so,

communicate the same with management for appropriate nature and relevance of cost information available, and
correction; evaluate the effect of uncorrected misstatements; controls over preparation;
communicate with those charged with governance; and (c) Develop an expectation of recorded amounts or ratios
appropriately document the conclusions and the basis for arriving and evaluate whether the expectation is sufficiently
at the conclusions. precise to identify a misstatement that, individually or
Misstatements may result from: when aggregated with other misstatements, may cause
(a) An inaccuracy in gathering, classifying and /or processing the cost statements to be materially misstated; and
data from which the cost statements are prepared; (d) Determine the amount of any difference of recorded
(b) An omission; amounts from expected values that is acceptable without
(c) An incorrect costing estimate arising from overlooking, or further investigation.
clear misinterpretation of, facts; and Analytical procedures include the consideration of comparisons
(d) Judgments of management on cost estimates that the of the entity’s cost information with, for example:
cost auditor considers unreasonable or the selection and (a) Comparable cost information for previous years or
application of costing principles, methods, and policies periods.
that the cost auditor considers inappropriate. (b) Anticipated results of the entity, such as cost of
The correction by management of all misstatements, including production / operation, input –output norms of major
those communicated by the cost auditor, enables management to items of cost, etc.
maintain accurate cost records and reduces the risks of material (c) Similar industry consumption norms or with industry
misstatement in future cost statements because of the cumulative averages of major items of cost or cost of goods sold
effect of immaterial uncorrected misstatements related to prior or with other entities of comparable size in the same
periods. industry.
12. SCA 112- Cost Auditing on Analytical Procedures 13. SCA-113 on Using the Work of Internal Auditor
This Standard deals with the cost auditor’s use of analytical The objectives of this standard, where the entity has an
procedures as substantive procedures. It also deals with the cost internal audit function and cost auditor expects to use the work
auditor’s responsibility to perform analytical procedures near of the internal audit function to modify the nature or timing, or
the end of the audit that assist the cost auditor when forming reduce the extent, of audit procedures to be performed directly
an overall opinion on the cost statements, in risk assessment by the cost auditor, or to use internal auditor to provide direct
and guidance regarding the nature, timing and extent of audit assistance, are:
procedures in response to assessed risks. (a) To determine whether the work of the internal audit
“Analytical Procedures” mean evaluation of cost information function or direct assistance from internal auditors can
through analysis of possible relationship among both cost be used, and if so, in which areas and to what extent;
and non-cost data. Analytical procedures also encompass and having made that determination:
such investigation as is necessary of identified fluctuations (b) If using the work of the internal audit function, to
or relationships that are inconsistent with other relevant determine whether that work is adequate for purposes
information or that differ from expected values by a significant of the audit; and
amount. (c) If using internal auditors to provide direct assistance, to
For meaning of “Substantive procedures” and “Test of appropriately direct, supervise and review their work.
Controls, please refer SCA-107 Audit Evidence above. It is choice of the cost auditor to use the work of internal
When designing and performing substantive analytical auditor. If he uses it will help him to modify the nature or timing,
procedures, either alone or in combination with test of details, or reduce the extent, of audit procedures to be performed directly
as substantive procedures in accordance with other SCAs, the by the cost auditor; it remains a decision of the cost auditor in
cost auditor shall: establishing the overall cost audit strategy.
(a) Determine the suitability of particular substantive The cost auditor shall not use an internal auditor to provide
analytical procedures for given assertions, taking account direct assistance if:
of the assessed risks of material misstatement and tests (a) There are significant threats to the objectivity of the
of details, if any, for these assertions; internal auditor; or
(b) Evaluate the reliability of cost data from which the cost (b) The internal auditor lacks sufficient competence to
auditor’s expectation of recorded amounts or ratios are perform the proposed work.
developed, taking account of source, comparability, and Objectivity refers to the ability to perform tasks without

allowing bias, conflict of interest or undue influences of other governance in understanding matters related to the audit, and in
factors that may affect the cost auditor’s evaluation. developing a constructive working relationship. Those charged
with governance may assist the cost auditor in understanding the
14. SCA 114- Using the Work of a Cost Auditor’s Expert entity and its environment, in identifying appropriate sources of
During the cost audit, cost auditor may encounter complex audit evidence, and in providing information about specific items
or subjective matters which are potentially material to the of cost or events.
audit of cost statements. Such matters may require special Although the cost auditor is responsible for communicating
skill or knowledge. This Standard deals with the cost auditor’s matters required by this standard, management also has a
responsibilities regarding the use of an individual or organization’s responsibility to communicate matters of governance interest
work in a field of expertise other than accounting or auditing, to those charged with governance. Communication by the cost
when that work is used to assist the cost auditor in obtaining auditor does not relieve management of this responsibility.
sufficient appropriate audit evidence. Similarly, communication by management with those charged
The cost auditor has sole responsibility for the audit opinion with governance of matters that the cost auditor is required to
expressed, and that responsibility is not reduced by use of the communicate does not relieve the cost auditor of the responsibility
work of cost auditor’s expert. The cost auditor is to determine to also communicate them. Communication of these matters by
that the work of that expert is adequate for the cost auditor’s management may, however, affect the form or timing of the cost
purposes, the cost auditor may accept that expert’s findings or auditor’s communication with those charged with governance.
conclusions in the expert’s field as appropriate audit evidence.
Expertise in a field other than accounting or auditing may 16. SCA 116- Communicating Deficiencies in Internal Control
include expertise in relation to such matters as: to Those charged with Governance and Management
a. Determination of installed/ achievable capacity of plant, The purpose of this Standard is to establish requirements
machineries, process, product etc. and explains that the cost auditor is required to obtain an
b. Determination and or verification of consumption norms understanding of internal control relevant to the audit when
of various inputs like material, labour, machine hours, identifying and assessing the risks of material misstatement. In
technical standards. making those risk assessments, the cost auditor considers internal
c. Impact on consumption norms of various inputs due to control in order to design audit procedures that are appropriate
change in production process, change in technology, or in the circumstances, but not for the purpose of expressing an
substitute of major input material(s), opinion on the effectiveness of internal control. The cost auditor
d. Efficiency of machines, boiler etc. which has significant may identify deficiencies in internal control not only during this
impact on determination of machine hour rate, labour risk assessment process but also at any other stage of the audit.
hour rate and or utilities consumption pattern. This SCA specifies which identified deficiencies the cost auditor
e. The interpretation of contracts, laws and regulations. is required to communicate to those charged with governance
f. The analysis of complex or unusual tax compliance issues. and management.
This standard does not impose additional responsibilities on
15. SCA 115- Communication with Those Charged with Gov- the cost auditor regarding obtaining an understanding of internal
ernance control and designing and performing tests of controls over and
The objectives of this standard are to enable the cost auditor: above the requirements of standards on cost auditing.
(a) To communicate clearly with those charged with “Deficiency in Internal Control”: exists when:
governance the responsibilities of the cost auditor in (a) A control is designed, implemented or operated in such
relation to the audit of cost statements, and an overview a way that it is unable to prevent, or detect and correct,
of the planned scope and timing of the cost audit; misstatements in the cost statements on a timely basis;
(b) To provide those charged with governance with timely or
observations arising from the cost audit that are (b) A control necessary to prevent, or detect and correct,
significant and relevant to their responsibility to oversee misstatements in the cost statements on a timely basis
the cost reporting framework; and is missing.
(c) To promote effective two-way communication between If the cost auditor identifies deficiencies in internal controls
cost auditor and those charged with governance. designed to prevent or detect fraud during the audit of cost
This standard focuses primarily on communications from the statements, the cost auditor should take into account those
cost auditor to those charged with governance. Effective two-way deficiencies when developing the response to risks of material
communication assists the cost auditor and those charged with misstatement during the statement of audit.

Examples of matters that the cost auditor may consider in & consumption quantities for items such as consumption
determining whether a deficiency or combination of deficiencies of material, utilities, labour etc.
in internal control constitutes a significant deficiency include: c) Inspecting reports pertaining to the investigation of
(a) The likelihood of the deficiencies leading to material variances between budgets/ standard and actuals.
misstatements in the measurement, classification, d) These audit procedures provide knowledge about the
allocation, apportionment and absorption of costs. design of the entity’s budgeting policies and whether
(b) The susceptibility to loss or fraud relating to they have been implemented, but may also provide audit
misappropriation of assets or over-valuation or under- evidence about the effectiveness of the operation of
valuation of inventories. budgeting policies in preventing or detecting material
(c) The subjectivity and complexity in determining the misstatements in the classification of expenses.
quantity or value of consumption of raw materials,
utilities and other inputs effecting true and fair value of 18. SCA118- Identifying and Assessing the Risks of Material
cost of production or operations, cost of sales and margin Misstatement
for each product or service. An understanding of the entity and its control activities
(d) The volume of activity that has occurred or could relevant to audit, including internal control, establishes a frame
occur in the items of cost exposed to the deficiency or of reference within which the cost auditor plans the audit
deficiencies. and exercises professional judgment throughout the audit,
(e) The importance of the controls to the cost reporting particularly when assessing risks of material misstatement,
framework; determining materiality, considering the appropriateness of the
(f) The cause and frequency of the exceptions detected as a selection and application of cost accounting policies, identifying
result of the deficiencies in the controls. areas where special audit consideration may be necessary (for
(g) The interaction of the deficiency with other deficiencies example related party transactions), responding to the assessed
in internal control. risks of material misstatement, obtain sufficient appropriate audit
evidence, etc.
17. SCA 117- Cost Auditor’s Responses to Assessed Risks This standard describes the audit procedures to identify and
The cost auditor performs risk assessment procedures assess the risk of material misstatements and control activities
(which include obtaining an understanding of entity, its control relevant to the cost audit so that information obtained by
environment, its risk assessment process; undertake inquiries of performing such risk assessment procedures and related activities
management, observation, inspection of relevant documents; may be used by the cost auditor as audit evidence to support
and perform analytical procedures to assess risks of material assessments of the risks of material misstatement.
misstatements at cost statement level and at assertion level. After The objective of the auditor is to identify and assess the risks
assessing the risks, the cost auditor is to design and implement of material misstatement, whether due to fraud or error, at the
audit procedures responsive to the assessed risks of material cost statement and assertion levels, thereby providing a basis for
misstatement and evaluate whether sufficient appropriate audit designing and implementing responses to the assessed risks of
evidence has been obtained to reduce audit risk to an acceptably material misstatement.
low level.
This Standard on Cost Audit establishes requirements and 19. SCA 119- on Related Parties
provides application and other explanatory material regarding The purpose of this standard is to establish requirement to
the auditor’s responsibility to design and implement responses assist the cost auditor in identifying and assessing the risks of
to the assessed risks of material misstatement in audit of cost material misstatement associated with related party relationship
statements. and transaction, and in designing cost audit procedures to
The cost auditor may has designed specifically tests of controls respond to the assessed risk associated with such related parties.
for some risk assessment procedures as they provide audit Related party transactions are in the ordinary course of
evidence about the operating effectiveness of the controls and, business. In such circumstances, they may carry no higher risk
consequently, serve as tests of controls. For example, the cost of material misstatement of the cost statements than similar
auditor’s risk assessment procedures may have included: transactions with unrelated parties. However, the nature of
a) Inquiring about management’s use of standards or related party relationships and transactions may, in some
budgets. circumstances, give rise to higher risks of material misstatement
b) Observing management’s comparison of monthly of the cost statements than transactions with unrelated parties.
budgets or standard and actuals with respect expenses For example:

(i) Related parties may operate through an extensive and to conclude whether the cost statements, insofar as they are
complex range of relationships and structures, with a affected by those relationships and transactions:
corresponding increase in the complexity of related party (i) Achieve a true and fair presentation;
transactions. (ii) Are not misleading.
(ii) Information systems may be ineffective at identifying In addition, an understanding of the entity’s related party
or summarizing transactions and outstanding balances relationships and transactions is relevant to the cost auditor’s
between an entity and its related parties. evaluation of whether one or more fraud risk factors are present
(iii) Related party transactions may not be conducted under because fraud may be more easily committed through related
normal market terms and conditions; for example, some parties.
related party transactions may be conducted with no
exchange of consideration. Conclusion
Because related parties are not independent of each other, The brief of the above standards on cost auditing would
many cost reporting frameworks establish specific cost provide the insight to readers about the contents contained
accounting policies and disclosure requirements for related in these standards on cost auditing. The above brief does not
party relationships, transactions and balances to enable users supplement the proficiency which is very much required by the
of the cost statements to understand their nature and actual or cost auditors and Audit Team engaged for audit of cost records,
potential effects on the cost statements. Where the applicable cost statements and related documents of an entity. The audit
cost reporting framework establishes such requirements, the as per the standards would provide quality audit and would also
cost auditor has a responsibility to perform audit procedures to assist the cost auditor a step towards the requirements of “Peer
identify, assess and respond to the risks of material misstatement Review” which is not intended to find out the deficiencies in
arising from the entity’s failure to appropriately account for or the working of professionals but to improve the quality of work
disclose related party relationships, transactions or balances performed by them. In addition to above standards, the readers
in accordance with the requirements of the cost reporting are requested to read “Guidance Manual for Audit Quality”
framework. which is a significant attempt to improve the quality of the CMA
Even if the applicable cost reporting framework establishes professionals. MA
minimal or no related party requirements, the cost auditor
nevertheless needs to obtain an understanding of the entity’s [email protected]
related party relationships and transactions sufficient to be able
Glimpses of programmes organized on the
WORLD EARTH WEEK

(16-22 April, 2016)

D
igital media is one of the fastest growing platforms in the
world and as more and more people adapt to the digital
medium, its importance as marketing tool is becoming
more apparent. Over 15% of the Indian population uses internet
through various media. The number of Internet users has
increased along with the no. of households owning a computer.
The idea behind using Digital Media judiciously is providing a
customized message to the user. A focused message which can
be seen, read and imbibed by the user directly on their phone,
computer, laptop or tablet. Best place to target a user is where
he or she spends the maximum time. If the target consumers
spend most of their time online, then it makes sense to reach
them directly online.
Media agencies have rapidly adapted to the changing
CMA Dr Krishna Chandra Pandey media landscape, broadening the range of services they offer.
D I G I TA L M E D I A
Director Sponsorship, social media and search are just a few of the
Chetana’s Institute of Management & Research disciplines now offered by media agencies.
Mumbai
Kritika Pandey
Assistant Manager
Citi Corp Services India Pvt. Ltd.
Mumbai

Objectives of the Study Google, Facebook & MakerStudiosInc are the top 3 video
1. To explore innovative digital platforms available to properties in terms of unique visitors.
communicate brand message.
2. To study the strategic implementation of digital media
campaigns.
Methodology
Mix of Primary and Secondary Research: Information
from individuals employed with various ad networks provided
information on the various innovative properties they had to offer.
This project also highlights the articles and studies conducted on
the trends in the digital media industry. A few media planners
were also interviewed to understand the planning process which
included parameters like insight gathering, understanding the
target consumer and their attributes that could be connected to
the brand. Most of this information was gained through the use
of various tools that were accessible to the media planners.
Limitations
The project does not include the numerical data used to gain
insights about the target consumer behavior and details of the Demographic Profiling
media plan as this data is confidential.
Objective 1: Innovative Promotion Platforms
Internet Audience & Demographic Profiling 1. MIRRIADS
MirriAds is an embedded advertising specialist which delivers
In May 2015, Internet audience in India was at lakhs; embedded advertising by digitally placing brands, products and
images into video content ranging from Studio and Broadcast
Video internet audience in India was lakh. content to TV, Online and UGC.
MirriAd’s unique embedded advertising process enables
15-34 age group form of total internet user population. advertisers to reach large audiences in a compelling but
unobtrusive way. The brand is embedded in the heart of the
The majority of the internet audience consists of male content, providing invaluable association with it. The image
users. cannot be skipped. But it does not interrupt, delay or obscure
Google, Facebook and Microsoft are the top 3 in terms of the content, and so it does not annoy the viewer.
unique visitors. Amazon witnessed a rise in its average daily Zee offers this platform for all its television show videos that
visitors compared to April 2015. are uploaded on their Youtube channel. Advertisers can take
advantage of this technology since more and more consumers
are desensitized towards traditional ad messages. They avoid
those using tools, such as ad blockers. Product placement allows
a brand to target audiences interested in the entertainment
medium while they are generally captive.
Implementation Process

DIG ITAL M E DIA
2. SPIDIO intent than all industry norms. Another advantage is that these
Spidio is a wifi- advertising platform which has the ability to ads cannot be skipped or ignored and are served in the flow of a
reach mobile device that are connected to the wireless network user’s experience.
thus helping in creating location specific campaigns thus reaching 3.ALIVE APP
the audience which is right for the brand. Advertiser pays only for Augmented Reality (AR) is a new age technology that allows the
number of times the video promotions are seen (CPV). user to transform the real world objects into a digitally enhanced
Spidio has partnered with Airports, Hotels, Food and Beverages rich media experience. This rich media experience consists
outlets, Stadiums, and many more such locations where there is of viewing interesting content in the form of videos, images,
a presence of Free Wireless Network. Precision targeting can be animations, 3D, and discover what’s around them, etc. by just
done based on the device’s operating system, nature of device, scanning images with the augmented reality application.
browser, etc. AR can be used almost everywhere and in everything whether
Example it is print, object, location etc. thus enriching it with impressive
Brand: Emirates digital content that creates a delight for the end consumer.
Objective: Introducing New Flights to Chicago ALIVE with its cutting edge and innovative technology,
Target Audience: Businessman, Senior and top level executives has in a very short span of time enabled hundreds of brands
(International Flyers) and publishers in creating engaging AR experiences for their
Media Strategy: Reaching out to travelers at New Delhi and consumers. It has presence on all major mobile operating systems
Mumbai Airports to stay on top of their mind by increasing and has been downloaded by more than a million users. This
frequency of campaign during peak hours and optimizing delivery platform provides a platform to integrate digital with the main
to achieve higher CTR. stream medium of advertising helping in reaching the audience
outside the digital space.
Example
Volvo was looking to create brand awareness and spread the
word about the launch of its new series –V40, showcasing its
advanced features and generating registrations for test drive.
TYPE-IN ads
CAPCHA codes were originally designed to prevent malicious
programs from invading website content where users were asked
to type in whatever they say in the small box. Solve Media has Alive helped in engaging and interacting with the users by
transformed this property into an ad unit. Instead of seeing opening Volvo brand mobile page where apart from promoting
randomly generated letters, the user is given a phrase that its new series features users can also watch video’s, register for
advertises a product or service. TM
test drive, Like FB page, etc.
OLD CAPTCHA TYPE-IN
Objective 2: Digital Media Campaigns
Campaign 1: Birla Sun Life Insurance - Seed to Share
Birla Sun Life Insurance Company Limited (BSLI) is a joint
venture between the Aditya Birla Group, a well-known Indian
conglomerate and Sun Life Financial Inc, one of the leading
international financial services organizations from Canada. With
A tiny pop-up movie that gets displayed, when a user needs to an experience of over a decade, BSLI has contributed to the
type in a Captcha code to a website, is to verify their status. The growth and development of the Indian life insurance industry and
Captcha codes in this system are actually shown as part of the currently is one of the leading life insurance companies in India.
video clip unlike the static warped-text images generally used. Brief
This would result in users having to actually watch the clip to Birla Sun Life Insurance had a relatively low brand recall
gain access to the code. This way, users learn about a brand and no clear proposition in users’ mind. The brand created 3
helping the brand achieve higher recall, awareness, and purchase minute long branded video content. The biggest challenge was

to create brand recall by driving relevant conversations around l Twitter India trend.
“#KhudKoKarBuland” and empowering audience to be masters l 49% positive chatter around the video.
of their own destiny. l Leading to 23% increase in trust levels towards the brand.
Strategy
Taking up the challenge, the brand decided to launch the Campaign 2: Castrol India – Appiness: For the Biker, By
content on social platforms first and build the audience connect the Biker
before rolling it out on mass media. Castrol India Limited is an automotive and industrial lubricant
The media objective was to maximize reach and build manufacturing company. It is the 2nd largest manufacturer of
awareness around “Khud Ko Kar Buland”. To pull this off, a mix automotive and industrial lubricants in the Indian lubricant
of digital high impact properties, native advertising, influencer market and owns around 22% market share in the overall Indian
outreach and blogger outreach was used. Given the length of the lubricant market in 2014. It’s the part of Castrol Limited UK (part
video, the brand decided an approach to aid content discovery of BP Group). It has 5 manufacturing plants that are networked
in phase one followed by reach maximization. The video was with 270 distributors, serving over 70,000 retail outlets.
launched on YouTube first followed by generating buzz around In 1910, Castrol India started importing certain automotive
it on social platforms. lubricants from C Wakefield & Company made an entry in the
Execution Indian market. In 1979, CIL was incorporated under the name of
The brand adopted a two-pronged approach - build buzz on Indrol Lubricants and Specialities Pvt. Ltd. In was listed on BSE
social networking sites and create impact with digital impact in 1982 and CIL was converted into a public limited company.
properties. CIL had formed a subsidiary company in the year 1987 under the
They explored customized in-article video content integration name of Indtech Speciality Chemicals, Ltd. The current chairman
on TheLogicalIndian, HuffingtonPost ThatScoop, ScoopWhoop, of the company is Mr. Ravi Kirplani.
Social Samosa which aided video discovery. Celebs and Objective of the Campaign
influencers initiated conversations around “Khud Ko Kar Buland” Bikers’ groups are a growing category in India. These bikers share
to build positive communication in the social space. a common passion which is their love for bikes and travel. The aim
The high impact media properties across leading websites like was to provide them with a platform where they could connect
on the go.
Strategy
The strategy was to empower these bikers with a platform
which lets them connect with others bikers and share their
reviews and content. The idea was to provide them with an easy
to navigate interface to share their top touring routes, preferred
destinations and facilitate touch points with bike points and build
on reward points.
Execution
YouTube, Facebook, TOI and MSN were used during the launch to The thrill of the entire activity was that the Key Influencers
drive impact. Audience targeting of 25+ males on social networks along with John Abraham launched the Castrol Power Biking App
ensured the message was well precipitated to our TG. Handset and also did an interesting walk through of the App.
and network cut guaranteed targeted viewers on mobile. The features of the mobile app were revealed and discussed
Integrations with content discovery platforms supported wider in detail with a tweet-up and a LIVE webcast of the event which
audience penetration. Personalized messaging mix by bloggers, proved to be a hit among biker communities. Conversations
celebs and social influencers drove awareness and chatter around around the App were fuelled with the hashtag #TheBikerApp and
“#KhudKoKarBuland”. #PowerChatWithjohn and John Abraham also participated in the
Result conversations on Twitter.
l 5,156,369 views and still counting.
l 80,638,621 impressions
l 95,000 social engagements on Facebook, Twitter,
YouTube, Blogs
l More than 13,000 conversations around
#KhudKoKarBuland.
l 86% of the chatter from 25-44 year’s audience segment.

DIG ITAL M E DIA
Result Spend Dispersion: Video vs Display vs Search

The brand was successful in creating a pre-launch buzz for the Execution
entire activity as the conversations prior to the launch contributed 1st Phase: Bajaj Pulsar: Focus on Video
to around 48% of the total chatter. Fans were excited and were With the objective of maximizing visibility for New Pulsar TVC,
looking forward to the meeting John and the launch of the app. top video platform such as Facebook and YouTube were used
This helped in generating enough excitement and anticipation for targeting males 18-34 years of age with interest targeting of
the Mobile App launch. Sports, Music, Automobiles & Tech.
With more than 3,400 mentions of the hashtags #TheBikerApp 2nd Phase: Bajaj Pulsar: Focus on site visits through Clicks
and #PowerChatWithJohn, and a reach of 1,024,661 the campaign The objective here was to drive traffic to Mypulsar.com through
launch of the Biker App was a big hit among the biking community. native ads which helped educate the user about the USP’s of the
With more than 22,000 biker members downloads and 5.2 new Baja Pulsar bikes and display ads to spread awareness.
million seconds of engagement in just 2 months, it crossed the Top content consumption platforms such as Yahoo, Zigwheels,
industry benchmark and achieved a rating of 4.2. More than Bikewale and iCafe were used to promote the new launch.
250 biker clubs have been created and more than 1500 trips Achievements
scheduled with an average engagement rate of 240 seconds per The brand was able to generate high level of awareness using
user. both video and display ads with 13.4% better performance
The brand leveraged on its association with John Abraham than estimated in terms of overall video views and 44% better
and delivered a total of more than 15 million impressions for the performance in terms of overall clicks delivered.
hashtags to get the conversations going in the target audience.
With 96% of the conversations having the brand mentions also Conclusion
in it, it was successful in registering the brand Castrol in the users’ Digital media is a fast growing industry and the number of
mind. Seamless integration of the Castrol powered Bike points platforms that provide opportunity to advertise are numerous.
and a reward mechanism for the users in the Mobile App ensured The challenge is to select a platform that is most relevant to
footfalls in these bike points while touring. the target group that the brand caters to. The three campaign’s
mentioned in this report all have variations with regards to the
Campaign 3: Bajaj Pulsar RS and AS Launch Campaign media mix that is used to convey the brand message.
Bajaj Auto Limited is an Indian two-wheeler and three-wheeler Birla Sun Life Insurance campaign used a mix of social media
manufacturing company which is part of the Bajaj Group. Bajaj and high impact digital properties to generate interactions around
Auto is the world’s sixth-largest manufacturer of motorcycles and the brand’s TVC. Celebrities and influencers too joined in the
the fourth-largest in India. The Bajaj Pulsar is a motorcycle brand conversation giving it a greater reach.
owned by Bajaj Auto in India. Castrol, on the other hand, used the mobile platform by
Objective of the Campaign conceptualizing an app that would help the biker community plan
The primary objective was to generate awareness and build and organize bike rides to distant places. They also promoted
interest towards the new Pulsar launch targeting males between this app using social media platforms which helped generated
the age of 18-34 years. Amplify the USPs on relevant platforms. buzz around Castrol and its app. The app helped cater directly
Strategy to Castrol’s target group thus making it a high recall brand within
Data suggests that after social, video platforms have the the biker community
highest engagement. Brand loyalty can be very well leveraged Bajaj Pulsar used the video platform to promote the new launch
with targeted and native ads. Optimum mix of pull and push TVC with the objective of letting the masses know about this
media considered by outlining two clear objectives: Drive views new launch and making them aware of the USP’s. This followed
and Drive traffic to website. by display ads on platforms which would have a high reach of
The final media mix included Video, Impact, High contextual audience that were apt for the brand including auto websites
Display & Search, with majority spends on Video to showcase such as Zigwheels, Gaadi and bikewale.
New Pulsar TVC. Hence the platforms used may vary depending on the objective
of the campaign. It is not necessary that a website which has a
high number of unique visitors will be the first choice of a media
planner.
It is also important to note users are turning a blind eye
towards display ads. The user might not even see the ad which
is right there in from of them. That is where innovations such

as native advertising, TYPE-IN ads, come in. These type of ads 2. www.adage.com/article/digital/brands-check-publishers-ad-
seamlessly integrate with the content of the website and does viewability-math/298746/
not disturb the user’s website viewing experience in any way. GroupM and Unilever Push Publishers for More Proof Ads are Being
Such innovations when effectively used can help in reaching the Seen
correct audiences who are interested in knowing more about the 1. www.blogs.wsj.com/cmo/2014/10/24/groupm-and-unilever-push-
brand. publishers-for-more-proof-ads-are-being-seen/
Programmatic Buying will play an important role in getting Innovative Media Platforms
better results and generating more leads since it will help in 1. MIRRIADS - India.com
specifically targeting users who have an affinity towards the 2. Spidio - Fork Media
product/brand being promoted. MA 3. Alive app - Times Group
4. TYPE-IN ads - solvemedia.com/advertisers/
References Other Online Resource
Mobile Future by Tomi Ahonen 1. http://www.careerplayer.com/graduate-jobs/advertising-and-pr/
1. www.slideshare.net/Mobil-Business/mobile-future-tomi-ahonen the-media-planning-and-buying-industry
2. www.slideshare.net/wsa-mobile/tomi-ahonen-engage-with- 2. www.businessinsider.com/daily-million-dollar-idea-solve-media-
mobilewsaabudhabi2015-44927879 2010-9#ixzz3giKyev8A
10 Things You Need to Know Now About Programmatic Buying 3. www.alivear.com
1. www.adageindia.in/marketing/news/10-things-you-need-to-know- 4. www.jagranjosh.com/articles/digital-media-marketing-in-india-
now-about-programmatic-buying/articleshow/47502368.cms growth-and-future-case-study-for-mba-students-1434800720-1
Too native for comfort? 5. www.birlasunlife.com
1. www.afaqs.com/news/story/44128_SPOT-THE-NATIVE-AD-IN- 6. www.en.wikipedia.org/wiki/Bajaj_Auto
THIS-CONTENT 7. www.comscore.com
Google Says 46% of Web Video Ads Are Never Viewed
1. www.adageindia.in/digital/google-says-46-of-web-video-ads-are- [email protected]
never-viewed/articleshow/47203336.cms [email protected]
UGC Sponsored National Seminar
The Commerce Department of Naba Ballygunge Mahavidyalya,
Kolkata is going to organise a UGC sponsored one day National
Seminar on “Startup India and its Prospect” in collaboration with
the Institute of Cost Accountants of India on 28th August, 2016 at the
college auditorium. Interested persons can send their research papers
(within 5000 words) alongwith the abstract (within 150 words) on
this topic at the e-mail id : [email protected] within
30th June, 2016.

MANAGEMENT ACCOUNTING
CMA Anil Kshatriya CMA Kunal Khairnar

Assistant Professor (Finance) Doctoral Student at
Institute of Management TSE - Ecole d’économie de
Technology, Nagpur Toulouse School of Economics, France
Corporate Finance textbooks make a suggestive statement about the reinvestment of the
cash inflows from a project. Two mutually exclusive project proposals, NPV and IRR can
give conflicting decisions. In case of one project, the NPV may be superior while for the other
project, the IRR may be superior. This paper explains how such a situation can be resolved
by using what is known as ‘Fisher’s rate’. The assumption regarding the reinvestment rate
is fundamental to the discussion about capital budgeting decisions and recognizing the
reinvestment rate in an explicit manner is essential for appreciating the implications of the
NPV/IRR methodology on investment decisions. This paper explains how investment deci-
sions can be refined using Fisher’s rate and introduces the concept of ‘Modified NPV’ using
the Terminal value approach.

Introduction forgo A.
Net Present Value (NPV) and Internal Rate of Return (IRR) are This situation is very likely to arise in most business
the two of the most well-known and commonly used techniques organizations (more so in growing economies) as there would be
in evaluating investment or capital expenditure projects. Most a number of investible projects competing for limited amount of
of the elementary text books on Corporate Finance introduce funds. We would not be discussing the scenario where both NPV
these two concepts to the students while discussing capital and IRR give the same results as it would be a straightforward
budgeting decisions. So also, these two techniques are widely decision if both the methods unequivocally tell us which one of
used by companies as well as banks/financial institutions for the two projects is better .i.e. there is no conflict in such a case.
project appraisal and project financing. However, in certain However, conflicting decision scenario may arise on account
circumstances, NPV and IRR approaches may give conflicting of pattern of cash flows of the two projects. Let’s say, if project
results. Bhas higher cash inflows in the beginning as compared to project
Previous research papers (Dudley, 1972) on this subject of A, whereas project A has total amount of cash inflows higher
resolving the conflicting results for capital budgeting decisions than project B. This will result in a higher IRR for project B (due to
have pointed out that the concept and relevance of the faster payback) and higher NPV for project A (due to higher total
reinvestment rate has not been dealt with appropriately by cash inflows). This will be clear from the example given below:
contemporary text books on Corporate Finance. Surprisingly, Year Project A Project B
the anomaly still persists. This article attempts to highlight the 0 -100000 -100000
importance of the reinvestment rate and bring its relevance to the
1 10000 60000
forefront suggesting that it is of critical importance in resolving
the aforesaid conflict between NPV and IRR. 2 20000 50000
Conflicting decisions: NPV and IRR 3 30000 18000
The conflict between NPV and IRR implies that for two given 4 40000 1000
mutually exclusive projects, NPV approach favors one particular 5 60000 1000
project (let’s say A) over the other (let’s say B), whereas the IRR PV @ discounting rate
approach suggests that B is better than A. This conflict then leads $112,735.10 $110,695.37
of 10%
us to the next logical question as to which of the two approaches NPV $12,735.10 $10,695.37
(NPV v/s IRR) is better.
IRR 13.76% 17.03%
Interestingly, both NPV and IRR are superior to other methods
like Payback period, Average Accounting return etc because they As can be seen from the table above, project B should be
consider all the project cashflows (unlike Payback period) and taken up based on the IRR criterion, whereas project A appears
the time value of money (unlike Accounting Rate of Return). So to be the better option as per NPV (at a discounting rate of 10%)
also, each of the two may be looked upon as the mathematical criterion. Here comes the critical choice. Which project is actually
counterpart of the other and there exists a mathematical better than the other?
relationship between the two viz. IRR is that discounting rate at Resolution of the conflict: Terminal Value approach
which NPV is 0. &Reinvestment
For a single project, both NPV and IRR lead us to the same The question of which project is better can be generalized
decision i.e. a project is considered to be acceptable if NPV to which approach is better, NPV or IRR? In our discussion so
is greater than 0 (for a given level of discounting rate), and far, we have delved on the similarities between NPV and IRR,
whenever NPV of a project is greater than 0, the IRR is greater namely the mathematical relationship between the two (NPV is
than the discounting rate, which is the criterion for acceptability 0, if we use IRR as the discounting rate) and that for a single
under the IRR approach. Thus for appraising the acceptability of project, both NPV and IRR lead us to same decision i.e. whether
a single project, there is no conflict between NPV and IRR. to accept the project or not. Why then, do the results differ when
The same is however, not the case when there are two or more we are comparing two or more projects? What is essentially the
projects. Here, to begin with, we assume that there are only two different in these two approaches? The answer to this question
projects, both requiring same initial investment and also with is the (implicit) assumption regarding the reinvestment rate. The
the same project life. This can be viewed as a Capital Budgeting assumption regarding the reinvestment rate of the intermittent
decision where a company has a limited capital (debt, equity and cashflows received till the termination of the project is actually
hybrids) to invest in either of the two mutually exclusive and fundamental to the very definition and understanding of the NPV
indivisible projects i.e. If the company chooses to go ahead with and IRR. NPV approach assumes (implicitly, as the text books say)
project B, it would invest the entire investible funds into B and that reinvestment rate is the Weighted Average Cost of Capital

M ANAG E M E N T ACCO U N T IN G
(or the discounting rate used for calculating the NPV), whereas As per definition of IRR,
the IRR approach assumes that the cashflows are reinvested at Initial Investment (I0)
the IRR itself. C1(1+r)4 + C2(1+r)3 + C3(1+r)2 + C4(1+r)1 +C5(1+r)0
When we say that NPV of a project A is $ 12,735 at a =
(1+r) 5
discounting rate of 10%, implies that the NPV is $ 12,735 only if
the cashflows are reinvested at the rate of 10%. The NPV would Here = reinvestment rate = discounting rate
C1(1+r)4 + C2(1+r)3 + C3(1+r)2 + C4(1+r)1 + C5(1+r)0
be higher if the reinvestment rate is greater than 10% and lower I0 =
(1+r) 5 (1+r) 5 (1+r)5 (1+r)5 (1+r)5
if the reinvestment rate is lower than 10%. Unfortunately, most C1 + C2 + C3 + C4 + C5
books on Corporate Finance do not delve deeper into what the I0 = (1+r) 1 (1+r) 2 (1+r) 3 (1+r)4 (1+r)5
reinvestment rate is and do not go beyond mentioning that the
implicit rate of reinvestment in case of NPV is the discounting Thus, r = reinvestment rate = Discounting rate = IRR
rate. Thus, the advantage of viewing decision from the reference
Similarly, the IRR of project can be significantly different from point of the Terminal value and then discounting it is that it
the conventional formula, if we assume that the intermittent cash compels us to consider an ‘explicit’ reinvestment rate which
flows are reinvested at a different rate (Modified Internal Rate hitherto was missing in the formula because of the implicit
of Return). assumption. NPV and IRR can thus be looked upon as two special
Explicit Reinvestment rate cases where reinvestment rate is assumed to be WACC and IRR
The Terminal Value approach may make this point clear. respectively.
Instead of directly discounting the cashflows as on current date, The IRR approach has been generalized using the Modified IRR
we can look at the same cash flows as on the terminal date of approach: C (1+r)4 + C (1+r)3 + C (1+r)2 + C (1+r)1 +C (1+r)0
1 2 3 4 5
the project i.e. we compound all the cash flow (using an explicit I0 =
(1+MIRR)5
reinvestment rate)up to the end point of the project (Terminal
Value of the project), rather than discounting each of the cash On similar lines, the NPV approach can be generalized using an
flow at the starting point. The terminal value, in turn can be explicit rate, which may be distinct from WACC. Let us call this as
discounted (at the WACC) to arrive at the Net Present Value Modified NPV (MNPV):
C1(1+r)4 + C2(1+r)3 + C3(1+r)2 + C4(1+r)1 +C5(1+r)0 - I0
(when the reinvestment rate is the WACC or the discounting rate). MNPV =
(1+R) 5
Similarly, the rate of return which equates the Terminal value to
the initial investment is the IRR (when the reinvestment rate is Where r = reinvestment rate, R = WACC
same as the IRR) or the MIRR (when there is reinvestment rate is Students (as well as professionals) accept the NPV formula as
distinct from IRR). given and do not conceive what would be the implications if the
Terminal value reinvestment rate was different. In other words, by making the
= C1(1+r)4 + C2(1+r)3 + C3(1+r)2 + C4(1+r)1 +C5(1+r)0 reinvestment rate as implicit, we do not consider the possibility
Where r is the reinvestment rate of an ‘explicit’ reinvestment rate.
Present Value of the Terminal Value: This can be crucial to our decision to invest or not to invest
PV of Cash Inflows in the project at all. So also (as will be clear in the following
C1(1+r)4 + C2(1+r)3 + C3(1+r)2 + C4(1+r)1 +C5(1+r)0 discussion), it can be the deciding factor for choosing between
= two projects, where NPV and IRR are giving conflicting results.
(1+r) 5
Assuming reinvest to happen at WACC or discounting rate, Year Project A Project B
therefore WACC = r 0 -100000 -100000
Simplifying the above equation gives us the following result:
1 10000 60000
C1(1+r)4 + C2(1+r)3 + C3(1+r)2 + C4(1+r)1 + C5(1+r)0 2 20000 50000
=
(1+r)5 (1+r)5 (1+r)5 (1+r)5 (1+r)5 3 30000 18000
Subtracting Initial investment from the PV of Cash Inflows 4 40000 1000
C1 + C2 + C3 + C4 + C5 - I0 5 60000 1000
=
(1+r) 1 (1+r) 2 (1+r) 3 (1+r) 4 (1+r) 5 PV @ discounting rate of 10% $112,735.10 $110,695.37
NPV $12,735.10 $10,695.37
= NPV
Similarly, IRR can be expressed in terms of the Terminal Value: IRR 13.76% 17.03%

Coming back to the earlier example of two mutually exclusive projects, where project A has a higher NPV whereas project B has a
better IRR, let us analyze results based on discounting (at WACC of 10%) of Terminal value (compounded at an explicit reinvestment
rates) i.e. Modified NPVs (as per definition given above). We would corroborate our results with respective Modified IRRs in our attempt
to resolve the aforesaid conflict.
MNPV* MIRR*
Reinvestment rate Project A Project B Project A Project B

4% $4,466.20 ($8,138.72) 10.97% 8.15%
5% $5,794.17 ($5,181.20) 11.25% 8.84%
6% $7,141.89 ($2,152.60) 11.53% 9.52%
7% $8,509.62 $948.22 11.81% 10.21%
8% $9,897.57 $4,122.38 12.10% 10.89%
9% $11,305.98 $7,371.05 12.38% 11.58%
10% $12,735.10 $10,695.37 12.67% 12.26%
11.04% $14,250.53 $14,250.53 12.97% 12.97%
12% $15,656.38 $17,575.65 13.25% 13.62%
13% $17,149.02 $21,133.97 13.54% 14.30%
14% $18,663.33 $24,772.66 13.83% 14.98%
15% $20,199.54 $28,492.92 14.12% 15.66%
20% $28,217.77 $48,360.46 15.61% 19.03%
*WACC or discounting rate assumed to be 10%
Fisher’s Rate Relation between Modified NPV and Reinvestment rate

It can be seen that there is a clear pattern emerging from the
above table. At lower reinvestment rates, project A has a higher
MNPV than project B. So also, the respective MIRRs of project
A are higher than project B. Thus, it can be safely be concluded
that project A (the one with higher NPV) is a better project than
project B at lower reinvestment rates .i.e. for all reinvestment
rates below 11.04%.So also, lower the reinvestment rate, higher
is the difference between the project A and B’s MNPV and MIRR.
On the other hand, at higher reinvestment rates, project B
has higher MNPVs as well as higher MIRRs than project B. If the
reinvestment rate higher than 11.04%, project B (the one with
higher IRR) is clearly the better project. Moreover, higher the
reinvestment rate, higher is the difference between the project B
and A’s MNPV and MIRR.
There is a cutoff/ break-even level of reinvestment rate
(11.04%), where the MNPV as well as MIRR of both the projects
is equal. This particular rate is known as the “Fisher’s rate”.

M ANAG E M E N T ACCO U N T IN G
Relation between Terminal Value and Reinvestment rate MNPV of project B =TVB - I0
(1+r) 5
= CB1 (1+ RF) 4+ CB2 (1+ RF) 3+CB3 (1+ RF) 2+CB4 (1+ RF) 1+ CB5 - I0
(1+r) 5
Fisher rate implies that MNPV of both projects is equal:

CA1 (1+ RF) 4+ CA2 (1+ RF) 3+CA3 (1+ RF) 2+CA4 (1+ RF) 1+ CA5 - I0
(1+r) 5
= CB1 (1+ RF) 4+ CB2 (1+ RF) 3+CB3 (1+ RF) 2+CB4 (1+ RF) 1+ CB5 - I0
(1+r) 5
Therefore,
CA1 (1+ RF) 4+ CA2 (1+ RF) 3+CA3 (1+ RF) 2+CA4 (1+ RF) 1+ CA5 =
CB1 (1+ RF)4+ CB2(1+ RF)3+CB3(1+ RF)2+CB4(1+ RF)1+ CB5
(CA1- CB1)(1+ RF) 4+ (CA2- CB2) (1+ RF) 3+ (CA3- CB3)(1+ RF) 2+(CA4- CB4)(1+ RF)1+ (CA5- CB5) =
0
Dividing both sides by (1+ RF) 5
The key points from the aforesaid discussion can be (CA1- CB1)(1+ RF) 4+ (CA2- CB2) (1+ RF) 3+ (CA3- CB3) (1+ RF) 2+ (CA4- CB4) (1+ RF) 1+ (CA5- CB5)
(1+ RF) 5
summarized as follows: =0
If the reinvestment rates are equal to the Fisher’s rate, both the (CA1- CB1)+ (CA2- CB2) + (CA3-CB3) + (CA4-CB4) + (CA5- CB5) = I0 – I0 = 0
projects are equally attractive i.e. we are indifferent between the (1+RF) 1 (1+RF) 2 (1+RF) 3 (1+RF) 4 (1+RF) 5
two projects. At the Fisher’s rate of reinvestment, both projects
not only have the same MNPV, but also the same MIRR Thus, for two projects of equal initial investment size, Fisher’s
If the reinvestment rates are lower than the Fisher’s rate, the rate of return is the discounting rate which equates the present
project with a higher NPV (project A in our example) should be value of differential cash inflows to zero or in other words Fisher’s
selected. rate is the IRR of the differential cash inflows and differential cash
If the reinvestment rates are higher than the Fisher’s rate, the outflows for two projects of equal initial investment size.
project with a higher IRR (project B in our example) should be
selected. Following facts should be noted about the Fisher’s rate
Whereas NPV and IRR approach give conflicting results, the The aforesaid formula would apply to two projects having the
decisions based on Modified NPV are consistent with Modified same investment horizon and same initial investment.
IRR approach at all levels of reinvestment rate i.e. the project Fisher’s rate is indifferent to the discounting rate of WACC i.e.
with higher MNPV also has higher MIRR and vice versa. Thus, the the Fisher rate remains the same irrespective of the discounting
conflict between NPV and IRR can be resolved by modifying both rate
the approaches using the relevant reinvestment rates.
It is surprising to note that despite the critical role in determining Reinvestment Rate Assumption
(or at least understanding capital budgeting decisions); Fisher’s An explicit Reinvestment rate assumption necessitates that
rate hardly finds a mention in the contemporary Corporate we should estimate the possible reinvestment rates for the
Finance text books. intermittent cash flows. As discussed above, he NPV approach
makes an implicit assumption that cashflows are reinvested at
Calculation of the Fisher rate the WACC whereas the IRR assumes that the reinvestment rate
Let cash flows of project A are represented by CA1,CA2,CA3etc. is equal to IRR. Out of the two, the former seems to be more
and cash flows of project B be represented by CB1, CB2, CB3etc. reasonable than the latter because the future capital budgeting
Assuming discounting rate = WACC = r, initial investment of both decisions will also be based on the WACC criterion i.e. a company
projects equal to I0 and time horizon equal to 5 years and Fishers would invest only those projects in which give a return at least
rate = RF. equal to the WACC. To this extent, the assumption seems to be
TVA - I0
MNPV of project A = more conservative than reinvestment at IRR which may be on a
(1+r) 5
higher side.
This is the reason why Corporate Finance text books favor NPV
CA1 (1+ RF) 4+ CA2 (1+ RF) 3+CA3 (1+ RF) 2+CA4 (1+ RF) 1+ CA5 - I0
= approach over IRR (Brealey and Myers, Principles of Corporate
(1+r) 5
Finance,1996) and conclude that in case of a conflicting results

scenario, we should simply choose the project with a higher method for evaluating capital budgets and prospective return
NPV (instead of all the analysis that has been discussed above). on investment. Discussion on Capital Budgeting decision cannot
However, the actual reinvestment rate may be different from the be complete without introducing the role of reinvestment rate
WACC. The text books make a sweeping assumption that the of cash flows in an explicit manner. Both NPV and IRR have
reinvestment rate is equal to WACC (marginal return on capital) certain assumption regarding reinvestment rate, which can
if capital is freely available. However, in reality (and definitely in lead to conflicting results for two or more mutually exclusive
the short run) the reinvestment rate would be different from the projects. The conflict can be resolved by resorting to an explicit
WACC. (In fact for a particular project, different cash flows may reinvestment rate rather than blindly following the “NPV is better
be reinvested at different rates. However for simplicity, we assume than IRR approach”. The Fisher’s rate serves as the cut off rate for
an average rate). Following examples make the point clear: deciding which of the two projects should be selected. The wealth
The cash receipts from the project may not be immediately or value by a project can be estimated using the Terminal value
reinvested into some other project. Typically, the cash flows approach, based on explicit reinvestment rate using a Modified
would be deposited in the bank account (either in a fixed NPV approach, analogous to the Modified IRR approach.
deposit account, or current account, overdraft facility etc). Fixed Financial decisions involving this approach will provide a clearer
deposit account will yield some interest which can be treated as understanding about relationship between risk and returns of
reinvestment rate for the duration of the deposit. Similarly, cash cash flows arising out of projects. MA
receipts in an OD account will lead to decrease in the outstanding
OD balance and save the interest thereon. The interest rate on References
the OD facility can be looked upon as the reinvestment rate for Brealey, Richard A. and Stewart C. Myers, Principles of Corporate
a short duration. Finance, McGraw-Hill Companies, 1996.
Similarly, the funds can be temporarily parked in money Damodaran, A, Principles of Corporate Finance, Wiley & Sons, 2002
market/short term instruments or liquid mutual funds by the Dudley, Carlton L., Jr., “A Note on Reinvestment Assumptions in
company. The return on the same may be treated as reinvestment Choosing between Net Present Value and Internal Rate of Return”,
rate. Journal of Finance 27 (September 1972), 907-915
The company may eventually use this money for future Johnston K, Forbes S, Hatem J (2002), ‘Reinvestment Rate Assumptions
projects. When it does so, the returns from the future projects in Capital Budgeting: A Note’ Journal of Economics and Finance
may not necessarily be equal to the WACC. In fact, WACC being Education, Volume 1, no. 2 (28-29)
the minimum expected return, the company will normally invest Keown, Arthur, John Martin, William Petty and David Scott, Financial
into projects which have a return higher than WACC. Management Principles and Applications, Prentice Hall, Ninth Edition,
In a capital rationing situation, supply of capital is not 2002.
unlimited. Hence we cannot assume that the reinvestment rate Renshaw, Ed, “A Note on the Arithmetic of Capital Budgeting Decisions”,
is equal to WACC. Journal of Business 30 (July 1957), 193-201.
An analysis of the average rate of return on capital made by
the company on similar project can be made. This can be used as
indicative reinvestment rate for the future.
Where cash flows are not reinvested at all and returned to
shareholders, we may assume the reinvestment rate to be WACC. [email protected]
At the project level, the part of cash flows will be repaid to
lenders, which can be interpreted as reinvestment being made at
cost of debt. To this extent, the reinvestment rate is in consonance
with the WACC. Hence, the factor which can have a real impact
on decision is the difference between the cost of equity and
reinvestment rate on the cash flows (after payment made to debt
holders). It may also be argued that in case of floating rate of
interest on debt, the aforesaid reinvestment will take place at
varying rates throughout the life of the project and not the cost
of debt assumed at the time of calculating WACC.
Conclusion
Managers in corporate finance roles often use NPV and IRR

1. Brief Profile of Tata Motors Ltd. and the Relevant Data:
Tata Motors Limited is the largest manufacturer in Indian automobile
industry and is the leader in commercial vehicles, and is among the top in
passenger vehicles. With manufacturing operations in the UK, South Korea,
Thailand, South Africa and Indonesia, the company’s international footprint
has expanded through joint ventures like the strategic alliance with Fiat and
Brazil-based Marcopolo. Today Tata Motors group is present in over 170
countries with world-wide network ( www.tatamotors.com).
CMA Dr. Bhabatosh Banerjee
Having created a global buzz by unveiling Nano, the world’s cheapest car,
Editor, Indian Accounting Review
President, IAA Research Foundation Tata Motors acquired two high-end brands, Jaguar and Land Rover (JLR)
Kolkata from Ford Company in 2009. The JLR are doing good business in overseas
market (UK, Europe, North America and many others barring China).
In view of the above, it may be of great interest to the financial statement analysts to know how the flag-ship company
has been managing one of the important aspects of financial management - working capital. With this end in view, extract
from Balance Sheets of Tata Motors Ltd. and some relevant information from the profit and loss statement for a period
of five years from 2010-11 to 2014-15, as available in the website (www.moneycontrol.com), are given below:
(Rs. in crore)
Year Ended
31.03.2015 31.03.2014 31.03.2013 31.03.2012 31.03.2011
Particulars
A. EXTRACT FROM BALANCE SHEET

1. Shareholder’s Funds 14,862.59 19,176.65 19,134.84 19,626.01 20,013.30
2. Non-Current Liabilities 14,709.95 11,760.24 11,945.32 12,715.80 15,176.88
3. Current Liabilities
Short Term Borrowings 7,762.01 4,769.08 6,216.91 3,007.13 4,958.77
Trade Payables 8,852.65 9,672.36 8,455.02 8,744.83 8,817.27
Other Current Liabilities 3,142.88 2,463.18 4,923.10 7,470.95 3,210.37
Short Term Provisions 613.09 1,892.91 1,509.58 2,954.56 2,013.86
20,370.63 18,797.53 21,104.61 22,177.47 19,000.27
4. Current Assets
Current Investments 20.22 100.85 1,762.68 2,590.26 86.00
Inventories 4,802.08 3,862.53 4,455.03 4,588.23 3,891.39
Trade Receivables 1,114.48 1,216.70 1,818.04 2,708.32 2,602.88
Cash and Cash Equivalents 944.75 226.15 462.86 1,840.96 2,428.92
CASE STUDY
Short Term Loans and Advances 1,574.41 1,223.77 1,532.09 1,871.74 1,850.62
Other Current Assets 117.03 109.06 104.26 113.41 111.85
8,572.97 6,739.06 10,134.96 13,712.92 10,971.66
B. EXTRACT FROM PROFIT AND LOSS STATEMENT
Net Sales 36,294.74 34,288.11 44,765.72 54,306.56 47,088.44
Profit Before Tax -3,974.72 -1,025.80 174.93 1,341.03 2,196.52
Reported Net Profit -4,738.95 334.52 301.81 1,242.23 1,811.82
2. Points for Analysis and Discussion

We analyse and discuss the following two points.
(1) What are net current assets, or working capital, of Tata Motors Ltd. for each of the five years, 2010-11 to 2014-
2015, and what relevant working capital ratios can be computed out of them for in-depth analysis and discussion?

CAS E S T U DY
(2) Was working capital used effectively during the period?

For ascertaining the working capital position in each of the five years, we compute the following figures including some relevant
ratios from the available table.
Year Ended
31.03.2015 31.03.2014 31.03.2013 31.03.2012 31.03.2011 Average
Particulars
Working capital (4-3) [Negative] (Rs./

11,797.66 12,058.47 10,969.65 8,464.55 8,028.57 10,263.78
crore)
Current Ratio (4¸3) 0.42 0.36 0.48 0.62 0.58 0.49
Liquid Ratio (CA – Inventories) ¸CL 0.19 0.15 0.27 0.41 0.37 0.28
Current Assets Turnover Ratio (Sales ¸ CA) 4.23 5.09 4.42 3.96 4.29 4.40
Debt/Equity Ratio 0.99:1 0.61:1 0.62:1 0.65:1 0.75:1 0.72:1
Current Liabilities ¸ Current Assets x 100 236.61% 278.9% 208.23% 161.73% 173.18% 211.73%
Current Liabilities to Total Funds (LT

68.9% 60.8% 67.9% 68.6% 53.0% 64.0%
Liabi.+Equity)
Return on Equity (Reported NP
(-) 31.89% 1.74% 1.58% 6.33% 9.05%
¸Shareholder’s Fund)
(1) The net current assets, or working capital, of Tata Motors from long-term sources. Stressing the credit period has its own
Ltd. are negative for all the five years with an average negative far-reaching implications. Firstly, the reputation of the firm will be
amount being Rs.10,263.78 crore. The current ratio in each of at stake. Secondly, trade payables will be costly in future as the
the years is well below even 1. Although the conventional ratio suppliers of goods and services would add an additional amount
is 2:1, a study of the cross section of various industries in India for extended credit period and such costs would be hidden.
generally will show a ratio of 1.45 to 1.50 to 1. Tata Motors is no In either case, such an eventuality does not normally appear
where near the convention or industry practice. The main reason desirable.
for maintaining current assets twice, or 1.5 times, the current In ascertaining the pattern of financing of current assets by short-
liabilities is that, even if there is some loss in conversion, a firm term vs. long-term sources, generally, a major part of the long-
can meet the immediate maturing obligations (current liabilities). term sources, debt, equity etc., is used for financing the entire
The liquidity position can best be assessed from liquid or acid- non-current assets and a minor part, for financing current assets
test ratio, i.e. (current assets less inventories) ¸ current liabilities, so that the remaining portion is financed by current liabilities.
a minimum of which 1:1 is suggested. Practice, however, differs from firm to firm. Nevertheless, this
Consideration of debt/equity ratio, along with current eventuality makes current assets always greater than current
liabilities/current assets ratio, may give total financing policy of liabilities, a positive net working capital position. From financing
Tata Motors. Generally, the higher the ratio, the greater is the point of view, the reverse is also possible, i.e. current liabilities
possibility of increasing rate of return to equity, as long as the are not only used for financing the entire current assets but
cost of debt is lower than the rate of return from the investment. also a portion of non-current assets – a situation where net
But financing from debt also increases the risk of shareholders. current assets will be negative and is referred to as an aggressive
Under favourable conditions - rising sales, lower cost of debt - a financing policy increasing the risk of the firm.
high debt-equity ratio may be adopted. In India, many financial The decision regarding financing the level of current assets by
institutions (e.g., IDBI, IFCI) prescribe a norm of 2:1 ratio for short-term vs. long-term sources, or, more appropriately, a
financing to firms in the private sector whereas for public sector feasible combination of the two, is based on consideration of three
enterprises, a 1:1 ratio is expected to be maintained. important factors, namely, flexibility, risk and cost. Financing from
Now a reference to liquidity or acid test ratio shows a dismal short-term sources than from long-term ones leads to flexibility
picture, that is, about only 28% of current liabilities, on an in repaying short-term loans than long-term ones because of
average, can be met from current assets. How does Tata Motors possible fluctuations in the level of current assets. But short-
then meet its maturing short-term obligations? There are two term sources are riskier than long-term sources because interest
possibilities, namely, stressing the credit period and/or financing cost on long term borrowing may be relatively stable over time

than that for short-term. Secondly, more and more dependence (2)The effectiveness of working capital management may be
on short-term sources may render a firm unable to repay its short- judged by sales to current assets ratio since, in the instant case,
term obligations. Regarding cost of financing, short-term sources working capital is negative in all the five years. Theoretically
are normally costlier than long-term sources in India. However, speaking, we use the ‘gross’ concept of working capital i.e.
it depends on three factors: (i) liquidity or risk preferences of aggregate of current assets for the purpose. A comparison of the
lenders and borrowers, (ii) supply and demand condition in the sales and current assets and current liabilities indices may also
money market, and (iii) expectations about future interest rates. throw some light on it. It may be mentioned that if the level of
In recent years, companies in India have shown an increasing working capital is decreased relative to sales, the opportunity
tendency to go in for debenture issues to finance the whole, or for increase in the rate of return increases although the risk of
at least a part of, their working capital needs. the firm also increases. From this standpoint, efforts should be
A reference to financing of current assets by current liabilities made to increase the level of sales by using the same amount of
by Tata Motors Ltd. shows that current liabilities are more than working capital through greater productivity. The current assets
twice (211.73%), on an average, the current assets. This means turnover ratio is fluctuating significantly over the years with an
that after financing the entire amount of current assets, a average of 4.40. There is little sign of improvement to corroborate
sizeable portion of non-current assets are financed by short-term the increasing productivity of current assets.
sources. Take, for example, the case of 2014-15 where there are A study of movement of various items of current assets and
maximum amount of current liabilities of Rs.20,370.63 crore as liabilities may pinpoint the causes of unsatisfactory management
against current assets of Rs.8,572.l97 crore. The huge amount of of working capital over the years. For example, current
excess of current liabilities over current assets (i.e. Rs.20,370.63 investments have gone down significantly from 2011-12 to 2014-
– 8,572.97 = Rs.11,797.66 crore) is used for financing non- 15. Secondly, as percentage of current assets, it is negligible
current assets. Accordingly, this highly aggressive policy can be whereas many profitable companies in the private sector maintain
sustained, that too for a short-period only, if the profit position a good proportion, some times 40% to 50%, of current assets
of the company is satisfactory. But out of five years, the profit (e.g. Reliance Industries keep more than 50% of current assets). It
before tax is negative for 2013-14 and 2014-15 while in the earlier does not require any emphasis that current investments serve as
three years they are positive although there is downward trend an important source to meet, in case of dire necessity, maturing
taking 2010-2011 as the starting point. Return on Equity shows a short-term liabilities. Accordingly, a decreasing trend in current
significantly downward trend from 2010-2011 to 2013-2014. The investments in the instant case points out about the further
position in 2014-15, due to huge reported net loss, is alarming. strain on management of working capital. So, as in the previous
Net sales over the period show that sales for 2013-14 and 2014-15 case, the conclusion seems obvious in this case also.
are significantly down admittedly due to economic reasons. Apart
from decreasing sales, there may be other reasons attributable to 3. Concluding comments
the downfall of profits over the years. Does the overall scenario Ratio analysis and the conclusions based on it have
justify the aggressive financing policy? One would be tempted to their own limitations. Even then, it serves as a pointer to the
draw negative conclusion in this respect. prevailing practices, based on which many policy decisions may
We now turn to debt-equity ratio of Tata Motors Ltd. It shows be taken. MA
that, on an average, the ratio is only 0.72:1. Taking 2010-11 as the
starting point, the dependence of debt financing has gradually
gone down till the ratio improves significantly (0.99:1)) in 2014- References
15 when the operating loss is also maximum. The overall risk of Banerjee, Bhabatosh, Financial Policy and Management
financing can be judged from current liabilities 6as percentage Accounting, PHI, 8th Ed.
of total funds (equity plus non-current liabilities) employed. On Hampton, John J., Financial Decision Making: Concepts,
an average, Tata Motor’s dependence on current liabilities for Problems & Cases, PHI, 4th Ed.
financing vis-à-vis total funds employed shows a very high ratio Howard, Leslie, R., Working Capital: Its Management & Control,
of 64% and the period from 2011-12 to 2014-2015 shows even Macdonald & Evans Ltd. , 1st Ed.
greater proportion of current liabilities to total funds. Does not Ramamoorthy, V.E., Working Capital Management, IFMR, 1978.
this trend indicate that Tata Motors have been compelled to rely Walker, E.W., Toward a Theory of Working Capital, Engineering
on the short-term sources more by adopting an aggressive policy? Economist, Vol. IX, No.2, January-February, 1964.
The high degree of financing risk not supported by a reasonably
acceptable return on equity is not in accordance with the general
principles of financial management. [email protected]

CMA Prachi Wazalwar
Advocate, Mumbai
The Companies Act, 2013 has introduced two tribunals, Difference between NCLT and NCLAT
one is the National Company Law Tribunal (hereinafter The NCLT has primary jurisdiction whereas NCLAT has
referred to as ‘Tribunal’ or ‘NCLT’) and the other one is appellate jurisdiction. NCLAT is a higher forum than NCLT.
National Company Law Appellate Tribunal (hereinafter Evidence and witnesses are generally presented before
referred to as ‘NCLAT’ or “Appellate Tribunal”). NCLAT is NCLT for taking the decisions and NCLAT generally reviews
the forum for dealing with appeals arising out of the orders decisions of NCLT and checks it on a point of law or fact.
of NCLT. After 14 years since there were mentioned in the Fact finding and evidence collection is primarily a task of
Companies Act1, it finally seems likely that these Tribunals Tribunal whereas the Appellate Tribunal decide cases based
will be constituted by the end of this year. on already collected evidences and witnesses.
Meaning Of NCLT And NCLAT Introduction of Concept of NCLT in India – Eradi

The NCLT or “Tribunal” is a quasi-judicial authority Committee
created under the Companies Act, 2013to handle corporate The concept of forming the Tribunal for dealing with
civil disputes arising under the Act. It is an entity that has various activities of companies was first introduced in the
powers and procedures like those vested in a court of law or Companies Act, 1956 by the Company (Amendment) Act,
judge. NCLT is obliged to objectively determine facts, decide 2002.
cases in accordance with the principles of natural justice The Tribunal was proposed to be established partly as
C O M PA N I E S A C T
and draw conclusions from them in the form of orders. Such a result of the recommendations of Eradi Committee. The
orders can remedy a situation, correct a wrong or impose Committee found that multiplicity of court proceedings
legal penalties/costs and may affect the legal rights, duties is the main reason for the abnormal delay in dissolution
or privileges of the specific parties. The Tribunal is not bound of companies. It recommended that powers of different
by the strict judicial rules of evidence and procedure. It can agencies that were dealing with different areas relating to
decide cases by following the principles of natural justice. companies - Board for Industrial & Financial Reconstruction
NCLAT or “Appellate Tribunal” is an authority provided (BIFR) (which dealt with references relating to rehabilitation
for dealing with appeals arising out of the decisions of the and revival of companies), High courts (which inter alia dealt
Tribunal. It is formed for correcting the errors made by the with winding-up of companies) and Company Law Board
Tribunal. It is an intermediate appellate forum where the (CLB) (that dealt with matters relating to prevention of
appeals lie after order of the Tribunal. The decisions of oppression and mismanagement etc) should be consolidated
Appellate Tribunal can further be challenged in the Supreme in one forum.
Court. Any party dissatisfied by any order of the Tribunal
may bring an appeal to contest that decision. The Appellate 2002 Amendment Challenged
Tribunal reviews the decisions of the Tribunal and has power Based on the recommendations, the Companies Act,
to set aside, modify or confirm it. 1956 was amended in 2002 to provide for constitution of
Tribunals. However, The Tribunals were never constituted as

the constitutionality of the said amendment was challenged by the challenging the said provision in the Supreme Court in 2013 and
Madras Bar Association in 2003. The Supreme Court in its order the matter was referred to a 5 judge bench of the Supreme Court.
passed on11 May 2010 in Union of India v R Gandhi declared that In its order dated 14th May 2015, the Apex Court upheld many of
certain provision of the said sections were unconstitutional and the provisions of Companies Act, 2013 on NCLT like power of NCLT
passed judgement. to punish for contempt of court. However, it held that certain
provisions were unconstitutional especially those pertaining to
JJ Irani Committee qualification of technical members and selection procedure for
While this case was pending in court, JJ Irani Committee was Tribunal members.
formed for making suggestion for enactment of a new company
law. In its report dated 31 May 2005, the Committee noted the Constitution of NCLT
importance of establishment of Tribunal and welcomed the move NCLT consists of President, Judicial and Technical Members.
to establish specialised Tribunals under the new company law. The chart lists the qualifications of judicial and technical
Introduction of Tribunal in Companies Act, 2013 members. The judicial member will be a person who is or is qualified
Thus, based on its recommendations, in the Companies Act, 2013, to be a High Court Judge. A range of professionals like chartered
the concept of Tribunals was introduced again. The nomenclature accountant, company secretaries, persons in the field of accounts,
namely “NCLT” and “NCLAT” was retained. However, the powers and law etc can be appointed as a Technical member. Joint Secretary
scope of the Tribunals were much wider under the new legislation (JS) level government servant in the certain legal service can also
The Companies Act, 2013 introduced the provisions for formation be appointed. It also provides for including members who have
of NCLT and NCLAT. Some of the suggestions set out by the good knowledge of the industrial laws, namely a presiding officer of
Supreme Court in the 2010 judgement were essentially complied labour court and member of Tribunal formed under Industrial Law
with and the provisions pertaining to the Tribunal and Appellate as a member. However, the qualifications of technical members must
Tribunal were suitably introduced in the revised format. be read in light of the Apex Court order.
However, the Madras Bar Association (MBA) again filed a case

CO M PAN IE S ACT
Number of Members New Powers

The Tribunal can have any number of Members. No bar is placed. Not only have several powers been transferred from various
Under the 1956 Act, this was restricted to 62. authorities, but new powers have been given to NCLT which include
power to:
Seat of NCLT l Decide class action;
The Seat of NCLT will be New Delhi. However, it is likely that like l Deregister a company and determine other incidental matters;
CLB, they will have benches in Mumbai, Kolkata & Chennai and l Remove auditor of a company;
certain other cities, l Reopen of books of accounts
l Revision of books of accounts
Powers of NCLT l Additional powers in case of non-payment of deposits
Under the new Act, NCLT has wide powers to deal with several l Revival of defunct company
matters. Powers from various authorities and judicial forums have
been transferred to NCLT. The basic intent is to create a single forum Transition to NCLT
to deal with corporate civil matter in an efficient and expeditious The Act has set out in detail the procedure to deal with cases
manner. which are pending in various forums. The Government must notify
a date for matters before Company Law Board and High Court. On
that date, all the pending proceedings will be transferred to NCLT.
However, the mechanism for continuation of proceeding is different
for proceedings for transfer from the two forums. In case of BIFR the
proceedings will abate1.
Cases pending in High Court

In case of cases pending before High Court on notified date, there
is specific direction that the Tribunal may deal with the matters from
the stage before their transfer.
Company Law Board

The matters pending before the CLB on notified date will be
transferred. The Tribunal is required to dispose of such matters in
Powers from CLB accordance with the provisions of law. Unlike in case of High court
Most of the powers that were previously enjoyed by CLB proceedings, there is no specific provision that the Tribunal can take
like powers with respect to oppression and mismanagement, up the proceeding at the stage where it was left. Thus, one possible
investigations, compounding of offences, repayment of deposits are interpretation may be that the Tribunal may start the proceedings
now transferred to NCLT. However, powers, like approving shifting afresh, even if the matter was at the final stage before CLB.
of registered office from one state to another are now transferred
to Central Government. Cases before BIFR
All cases before BIFR will abate with effect from the
Powers from High Court notified date. MA
Most of the powers of High Court are transferred to NCLT.
Following is a list of some of the important powers: References
a. Compromise and arrangements First the reference to NCLT was introduced in Companies Act, 1956 by the
1
b. Winding up Companies Second Amendment Act 2002. These provisions for NCLT were
c. Reduction of capital never notified and 1956 Act was thereafter replaced by Companies Act, 2013
d. Variation of rights which also provided for constitution of NCLT.
2
Abatement means the act of elimination or nullifying.
Power from BIFR
Powers for revival and rehabilitation of sick companies are
transferred from BIFR to NCLT under the new Act. These are enjoyed
by Board of Industrial and Financial Reconstruction. All proceedings
before BIFR will abate. [email protected]

Ready Reckoner for
APPLICABILITY OF SERVICE TAX
on services provided by Government & Local Authorities
government will be covered under the definition of service,

by giving suitable examples.
All services other than following provided by the
government are excluded from the definition of service:
CMA A. B. Nawal
Chairman, Taxation Committee l services by the Department of Posts by way of speed
Institute of Cost Accountants of India post, express parcel post, life Insurance and agency
services provided to a person other than Government;
Negative list of services introduced w.e.f. 1st July l services in relation to an aircraft or a vessel, inside or
2012and negative list of services was provided u/s 66D of outside the precincts of a port oran airport;
The Finance Act 1944,which is reproduced below: l transport of goods or passengers; or
66D services by Government or a local authority l support services, other than services covered under
excluding the following services to the extent they are not clauses (i) to (iii) above, provided to business entities;
covered elsewhere: Some of the examples are: providing Birth / Death
i. services by the Department of Posts by way of speed Certificate, Marriage Certificate, Completion Certificate,
post, express parcel post, life insurance and agency Passport, etc. etc.
services provided to a person other than Government; Un Quote
ii. services in relation to an aircraft or a vessel, inside or Since, all services provided by Govt. are now excluded
outside the precincts of a port or an airport; from the negative List by amending Sec 66D which has
iii.. transport of goods or passengers; or been made effective from 1st April 2016 and hence recipient
iv. (iv) support services, other than services covered of such services from the govt. have to discharge 100%
under clauses (i) to (iii) above, provided to business service tax liability on Reverse Charge Mechanism.
entities; Generally, any citizen or a person pays the Govt. the
The word “Support Services” was substituted with followings:
all services vide The Finance Act 2015,which was made a. Duties, taxes,
effective from 01.06.2015. However, effective date b. Fine & penalties relating to default in following the
of amendment of the section was notification w.e.f. law
01.04.2016 thereby all services provided by the Govt. is c. Fees / Charges for registration, licensing, permissions
subject to service tax on reverse charge basis. / permits, Authorizations
In my article published in our Bulletin in the month of d. Charges paid to the Govt. for coal blocks, spectrum,
April 2012 provides the Frequently Asked Questions (FAQ), e. Charges paid for providing amenities
TA X AT I O N
wherein I have clarified what is Govt.? and What are the f. Court Fees
services provided by the Govt.? which is reproduced g. Stamp Duty
below… h. Fees for Passport, Visa, Driving License, Birth / Death
Quote: Certificate
1. What is Government? The attempt has been made in this article to provide
Though Government has not been defined, General ready reckoner on various amount paid to Central Govt.,
Clause Act, 1897 will be applicable and Government State Govt. and Local Authorities. CBEC has already
includes State Government, Central Government, and issued details clarificative circular No. 192/02/2016 – ST
State includes Union Territories. dtd.13.04.2016 in very simplified manner and that has
2. Please explain, which services offered by the been also considered in this article.

TAXAT IO N
Sr. Particulars for which amount Taxable or Not

Comments
No. is paid to the Govt. Taxable
Duties & Taxes Not Taxable “Taxation” includes the imposition of any tax or impost, whether general or local
1 or special, and ‘tax’ shall be construed in accordance with article 366(28) of
Constitution of India.
It includes taxes levied by Central or State legislatures, and also those known
as ‘rates’, or other charges, levied by local authorities under statutory powers.
Whereas, Tax is having a wider sense includes all imposts. Imposts in the context
have following characteristics –
a. Imposing the tax is the sovereignty powers of the Central Govt., State
Govt. & Local Authorities under the law.
b. “Law” in the context of Article 265 means an Act of legislature and cannot
comprise of an executive order or rule without express statutory authority
c. The term ‘tax’ under article 265 read with Article 366(28) includes imposts
of every kind viz. tax, duty, cess or fees
d. As an incident of sovereignty and in the nature of compulsory exaction, a
liability founded on principle of contract cannot be a ‘tax’ in its technical
sense as an impost, general, local or special
To conclude, payment of duties & taxes is not on account of providing any ser-
vice by the Govt.
The said Board Circular also clarifies the same &illustrations of the taxes has
been given so as to clarify Excise Duty, Custom Duty, Service Tax, State VAT,
CST, Income Tax, Wealth Tax, Stamp Duty, Taxes on profession, Employment Tax,
Octroi / LBT, Entry Tax, Entertainment Tax, Luxury Tax & Property Tax.
Fine & penalties relating to de- Not Taxable Fines & Penalties chargeable by Govt. or Local Authorities on account of viola-
2 fault in following the law tion of a statute, bye-laws, rules or regulations arenot leviable to Service Tax.
Fees / Charges for registration, Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
3 licensing, to obtain certain privileges for consideration i.e. fees & charges and hence it
is covered under the definition of “Service” and not been exempted and hence
Taxable under reverse Charge Mechanism
4 Fees / Charges for permissions Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
/ permits to obtain certain privileges for consideration i.e. fees & charges and hence it
Fees / Charges for Authorization Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
5 to obtain certain privileges for consideration i.e. fees & charges and hence it
6 Charges paid to the Govt. for Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
Royalty for extraction of natural to obtain certain privileges for consideration i.e. fees & charges and hence it
resources is covered under the definition of “Service” and not been exempted and hence
Taxable under reverse Charge Mechanism.
Taxable other than specified in 7 & 9 (Not Taxable).
Charges paid to the Govt. for Not Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
7 allocation of natural resources to obtain certain privileges for consideration i.e. fees & charges and hence it
to an individual farmer is covered under the definition of “Service” and not been exempted and hence
However, it has been clarified by the Board that Services by way of allocation
of natural resources to an individual farmer for the purposes of agriculture have
been exempted vide Notification No. 25/2012 – ST dated 20.6.2012 as amended
by Notification No. 22/2016 – ST dated 13.4.2016 [Entry 59 refers]. Such alloca-
tions/auctions to categories of persons other than individual farmers would be
leviable to Service Tax.

Comments
Charges paid to the Govt. for Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
8 allocation of natural resources to obtain certain privileges for consideration i.e. fees & charges and hence it
to other than individual farmer is covered under the definition of “Service” and not been exempted and hence
Exempted has been granted to the individual farmer only.
9 Charges paid to the Govt. for Not Taxable Service Tax is payable on such installments in view of rule 7 of Point of Taxation
coal blocks, spectrum – One- Rules, 2011 as amended by vide Notification No. 24/2016 – ST dated 13.4.2016.
time payment However, the same have been specifically exempted vide Notification No.
25/2012 – ST dated 20.6.2012 as amended by Notification No. 22/2016 – ST
dated 13.4.2016 [Entry 61 refers]. The exemption shall apply only to Service Tax
payable on one time charge, payable in full upfront or in installments, for assign-
ment of right to use any natural resource
Charges paid to the Govt. for Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
10 coal blocks, spectrum – in In- to obtain certain privileges for consideration i.e. fees & charges and hence it
stallment or periodicalpayment, is covered under the definition of “Service” and not been exempted and hence
spectrum usage charges w.r.t. Taxable under reverse Charge Mechanism.
coal mines or royalty payable on Such payment do not cover vide Notification No. 22/2016 - ST dated 13.4.2016
extracted coal
Charges paid for providing Taxable If Government levies some charges for providing amenities, these should be sub-
11 Amenities ject to service tax.
However, charges for supplying electricity or water should not be subject to
service tax, as these are ‘goods’. Supply of goods cannot be a ‘service’.
Court Fees Not Taxable Court fee and payment made to arbitration / tribunal is excluded from the defi-
12 nition of “service” and hence no service tax is payable.
Stamp Duty Not Taxable Board has clarified vide circular dtd. 13.04.2016 that stamp duty collected is
13 not in nature of consideration and hence not covered under the definition of
“Services”
14 Fees for Passport & Visa Not Taxable Though certain privilege has been provided to the recipients, such service is spe-
cifically exempted vide Notification No. 22/2016dtd. 13.04.2016
15 Fees for Driving License / Re- Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
newal / Duplicate to obtain certain privileges for consideration i.e. fees & charges and hence it
Such payment do not cover vide Notification No. 22/2016 - ST dated 13.4.2016
Fees for Birth / Death Certificate Not Taxable Though certain privilege has been provided to the recipients, such service is spe-
16 cifically exempted vide Notification No. 22/2016 dtd. 13.04.2016
ROC Fees paid to Ministry of Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
17 Corporate Affairs to obtain certain privileges for consideration i.e. fees & charges and hence it
Agricultural Tax collected by Not Taxable It is exempted by Notification No. 22/2016 - ST dated 13.4.2016 being functions
18 Talathi / Tahasildar entrusted to Panchayat under Article 243 G of the Constitution.
Fees of 7/12 Extract / City Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
19 Survey Extract to obtain certain privileges for consideration i.e. fees & charges and hence it
Fines, penalties compensation Not Taxable Though certain privilege has been provided to the recipients, such service is spe-
20 paid for Non-performance of cifically exempted vide Notification No. 22/2016 dtd. 13.04.2016
contract entered into with Gov-
ernment or local authority

TAXAT IO N

Comments
PF Administration Fees& Annuity Not Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
21 Charges to obtain certain privileges for consideration i.e. fees & charges and hence it is
covered under the definition of “Service” and not been exempted and hence Tax-
able under reverse Charge Mechanism. However, this is exempted vide notifica-
tion No. 9/2016 ST dtd. 01.03.2016 effective from 1st April 2016, which provides
the exemption for Services of life insurance business provided by way of annuity
under the National Pension System regulated by Pension Fund Regulatory and
Development Authority of India (PFRDA) under the Pension Fund Regulatory
And Development Authority Act, 2013 (23 of 2013) and services provided by
Employees ` Provident Fund Organization (EPFO) to persons governed under
the Employees ` Provident Funds and Miscellaneous Provisions Act, 1952 (19
of 1952);
22 Motor Vehicle Inspection Not Taxable Though certain privilege has been provided to the recipients, such service is spe-
cifically exempted, since it is in relation to testing, calibration, safety check and
certification in relation to consumer & public at large required under RTO Act
vide Notification No. 22/2016 dtd. 13.04.2016
MOT Charges t Central Excise & Not Taxable Though certain privilege has been provided to the recipients, such service is spe-
23 Customs cifically exempted vide Notification No. 22/2016 dtd. 13.04.2016
Penalty, fee for late filing of Not Taxable It is the penalty on violation of specific Act / Rules.
24 return
Composition fees paid in accor- Not Taxable Though certain privilege has been provided to the recipients, such service is spe-
25 dance to order of Settlement cifically exempted vide Notification No. 22/2016 dtd. 13.04.2016
Commission
Any payment to the Govt. for Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
26 services provided more than Rs. to obtain certain privileges for consideration i.e. fees & charges and hence it
5000/- per annum is covered under the definition of “Service” and not been exempted and hence
27 Any payment to the Govt. for Not Taxable If amount is less than Rs. 5000/- per annum then it is exempted.
services provided less than Rs.
5000/- per annum
Building Plan Approval Fees, Not Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
28 charges for change of land use to obtain certain privileges for consideration i.e. fees & charges and hence it
and other utilities approval is covered under the definition of “Service” and not been exempted and hence
Taxable under reverse Charge Mechanism but the same is exempted vide notifi-
cation no. 22/2016 ST dtd. 13.04.2016.
29 Water Charges Not Taxable Since it is supply of water and not supply of service and hence no service tax
is payable.
Registration Fees for registering Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
30 Title Documents to obtain certain privileges for consideration i.e. fees & charges and hence it
Taxable under reverse Charge Mechanism. Registration fees is collected over &
above Stamp Duty and separately and hence it is not in nature of duties but to
the consideration for providing certain services.
Fees paid under Right to Infor- Taxable This activity is carried by Central / State Govt. for beneficiary person / desirous
31 mation Act. to obtain certain privileges for consideration i.e. fees & charges and hence it

Comments
Interest charge by the Govt. Not Taxable. It is excluded from the definition of service. However, if service tax is payable
32 Taxable only if, on the original amount on deferred payment, then it will be taxable as the part
payment is made of service being included in the taxable value in accordance with Rule 6(2)(iv) of
on installment /
deferred payment
the service tax (Determination of Value) Rules 2006 as amended vide Notifica-
basis tion No. 23/2016 ST dtd. 13.06.2016
We had specified in our article published in the month of April Farmer Welfare by way of cold chain knowledge dissemination;”
2015, where certain test were provided for determination of When service tax is payable?
applicability of service tax which are reproduced below: Date & Time of taxable payment is determined based on the
Quote: Point of Taxation Rules and Notification No. 24/2016 ST dtd.
Now, once the above provisions and definition of the law are 13.06.2016 to amend Point of Taxation Rules 2011, wherein
understood, to decide whether any Government or a Local Body proviso to Rule 7 has been inserted as below
Service will attract Service Tax under reverse charge or not, one Quote :
need to apply the final test “SGBCE TEST”:– Provided also that in case of services provided by the
1. Whether there is an activity performed / service provided Government or local authority to any business entity, the point
by the Government or a Local Authority which falls under the of taxation shall be the earlier of the dates on which, -
definition of Service as per “SERVICE TEST”? (a) any payment, part or full, in respect of such service
2. Whether such activity is performed / service is provided by a becomes due, as specified in the invoice, bill, challan or any
Government or a Local Authority “CHARGEABILITY TEST”? other document issued by the Government or local authority
3.. Whether such activity is performed / service is provided to demanding such payment; or
a Business Entity “CHARGEABILITY TEST”? (b) Payment for such services is made.
4. Whether there is a Consideration for such activity / service Unquote :
“CHARGEABILITY TEST”? It means challan /bill / any document / letter received by
5.. Whether such activity carried out / service provided is the recipient from the Govt. i.e. Central / State Govt.& Local
covered under Exemption / Negative list of service or falls under Authorities OR Payment made whichever is earlier.
exclusion portion of the definition of a service under “SERVICE Whether Service Tax is payable on any amount even by
TEST” including exemption category? small business entity?
Un- Quote: Yes. Generally Reverse Charge is payable without having any
Though an attempt is made to provide all types of payment exemption limit but Central Govt. have issued a Notification No.
collected by Central / State Govt. & Local Authorities in the above 7/2016 where small business entity having the turnover less than
Ready Reckoner, still some categories are left out then above test Rs. 10 Lacs in the preceding financial year are exempted from
to be applied for deciding taxability of service tax and payment payment of service tax on reverse charge basis.
thereof under Reverse Charge Mechanism. What is the Value on which service tax is paid?
Following services though not provided by Govt. but are Service tax is paid on gross value of amount paid to the Govt.
provided by body constituted by the Govt. and services provided However, when amount is paid in deferred payment system then
by them are not covered under services provided to the Govt., service tax is payable on the amount including interest.
but these are exempted vide Notification No. 9/2016 ST dtd. Whether Cenvat is allowed?
01.03.2016 made effective from 1st April 2016. Cenvat will be allowed if such payment falls under the
a. Services provided by Insurance Regulatory and Development definition of “Input Service” and is not covered under exclusions
Authority of India (IRDA) to insurers under the Insurance as provided in definition of input service. Cenvat credit can be
Regulatory and Development Authority of India Act, 1999 (41of taken against duty paying challan, which is used for payment of
1999); service tax on reverse charge basis. However, Notification no.
b. Services provided by Securities and Exchange Board of India 24/2016 CE (NT) dtd. 13.04.2016 restricts the cenvat, if payment
(SEBI) set up under the Securities and Exchange is made on one time charges (lumsum or installment) then
c. Board of India Act, 1992(15 of 1992) by way of protecting service tax is payable on the total amount but credit is allowed in
the interests of investors in securities and to promote the 3 even installment. MA
development of, and to regulate, the securities market;
d. Services provided by National Centre for Cold Chain
Development under Ministry of Agriculture, Cooperation and [email protected]

Eastern India Regional Council
The Institute of Cost Accountants of India - Howrah Chapter

The Chapter organized programme on Investors Awareness under
the aegis of IEPF, MCA, GOI at its premises on March 30, 2016.
The key speakers on the occasion were CMA Pranab Chakrabarty,
Secretary, EIRC, CMA Tapas Bhattacharya, past chairman of the
chapter and CMA Arunava Ghosh, chairman of the chapter. They
have explained in details about various savings and investments
options for safe investment to the public who have attended the
programme. The chapter organized workshop on ‘Internal Audit &
Charges under the Companies Act’13 and International Taxation’. CS
Hansraj Jadia, past
chairman, Hooghly
Chapter of Cost Accountants and Company Secretary, TSL-SAIL group
deliberated on the issues relating to charges under the Companies Act ’13.
CMA Mrityunjoy Acharya , Sr.VP, Balmer Laurie delivered on the issues
on International Taxation. CMA Pranab Chakrabarty, Secretary, EIRC
delivered the key note address and also explained the recent activities
of the chapter as well as the Eastern Region. CMA Tapas Kanrar, past
chairman of the chapter offered the formal vote of thanks.
The Institute of Cost Accountants of India - Bhubaneswar Chapter

On March 26, 2016 the Chapter received 19th Best Chapter
Award as Category-A in the Eastern Region at National
Regional Councils and Chapters Meet held at Munnar, Kerala
for its commendable performances in respect of professional
development activities, students’ activities & outstanding
performance at all India Level infrastructure, numbers of
students and members enrollment through this Chapter etc.
The said award was received by CMA Bibhuti Bhusan Nayak,
Chairman of the chapter in the presence of CMA Bikram
INSTITUTE NEWS
Keshari Das, Chairman, Professional Development Committee

of the chapter and CMA Saswat Tripathy, Member of the
Managing Committee of the Chapter, CMA Niranjan Mishra,
Council Member and Chairman, Regional Councils and Chapters
Coordination Committee of the Institute, CMA Shiba Prasad Padhi, Chairman, EIRC and CMA C. Venkata Ramana, Regional
Council Member, EIRC from CMA Manas Kumar Thakur, Vice President of the Institute. On the same day Special Award
was received as well with certificate of Scroll of Honour for first time from the Institute for conducting highest programme
at Eastern Region for the Professional Interest in the presence of Council Members and Regional Council Members of
the Institute. On April 14, 2016 the Chapter organized a Career Awareness Programme in association with the UNITECH
Residential College, Naygarh, Odisha. CMA Siba Prasad Kar, Chairman, Coaching Committee of the Chapter highlighted
about the profession, the facilities available at the chapter and how to become Cost and Management Accountant at
an early age and also its career prospects. Chairman of the Chapter, CMA Bibhuti Bhusan Nayak highlighted about the
profession and role of CMA professionals. He also interacted with the students in details. Mr Prabir Kumar Prusty,
Academic Director, UNITECH Group of Institution and Dr. L.D. Sahoo, Professor in Commerce also encouraged and advised
the students to pursue the Cost and Management Accountancy Course and highlighted about the career prospects.

Northern India Regional Council
On February 13, 2016 the Region organized Northern Regional Students Convention at Islamic Center, New Delhi. The
Chief Guest for the occasion was Shri Vikas Gupta, IIM & MD Compark Group, who addressed the students and had a
lively interactive session with them. The Convention was graced by
Council Member, CMA Sanjay Gupta, who was the guest of honour,
CMA SK Bhatt, CMA Sunil Singh, CMA Ravi Sahni, CMA Anil Sharma
& CMA Navneet Jain. Other speakers were CMA Dinesh Arora, Chief
Financial Officer, Resonance Eduventures Ltd, Dr. Meraj Husain,
Ex-Member, Film Censor Board, CMA Goutam Konar, Chief Manager
(Finance) GAIL. On February 20, 2016 the region organized seminar
on ‘Investigation of Frauds & Practical Aspects of International Joint
Venture’. Guest Speaker CMA Sunil Kr. Jain, shared the knowledge
on the above theme. On March 2, 2016 the Region organised a
program on ‘NIRC Budget Special & Role of CMAs, in Direct &
Indirect Taxation’. The key note speaker for the program was Mr
Subhash Lakhotia, an eminent speaker on taxation and an income tax
practitioner, for the last 45 years. Shri Satish Kumar Agrawal, Commissioner Customs & Central Excise, being the guest of
honour for the occasion, spoke on both Indirect & Direct taxation, in the light of the proposed budget. Another speaker
was Shri Hitender Mehta, a leading consultant & practitioner of taxation & business advisory services also deliberated
on matters relating to taxation. The occasion was also graced by Chairman NIRC, CMA S.K. Bhatt, Council Members,
CMA Sanjay Gupta, CMA I. Ashok, Vice Chairman NIRC CMA Ravi Kumar Sahni, CMA Anil Sharma, RCM & CMA Navneet
Kr. Jain, RCM. CMA Rakesh Bhalla, Ex-Chairman NIRC, also addressed the gathering and shared his experiences, in the
industry as the General Manager of a leading private sector organisation. NIRC organized a Practitioners’ Meet on March
4, 2016 to discuss the suggestions on The Draft Companies (Cost
Records and Audit) Amendment Rules, 2016. Detailed discussions
on each point of the Draft Rules were held. CMA B B Goyal, Advisor,
ICWAI-MARF guided the members as to how to send the suggestions
encompassing the justifications. Various members presented their
suggestions for the different industries in a lucid manner along with
justifications. NIRC forwarded the suggestions point-wise separately
to HO for onward submission to MCA. On 25 February 2016 a new
study circle has been formed in Noida, ‘Oil & Gas CEP Study Circle
Noida’ by CMA members of GAIL (India) Limited inaugurated by CMA
R C Gupta, Executive Director- Finance of GAIL India Limited and by
CMA S.K. Bhatt, Chairman NIRC. Convener of study circle is CMA A
K Tiwari, GM, F&A and Deputy Convener CMA A K Jain, CM, F&A.
The Institute of Cost Accountants of India - Patiala Chapter

The Chapter organized a one day seminar on the occasion of silver
jubilee celebrations based on the theme of GST and Ind AS (IFRS) on
April 10, 2016. The seminar had been organized to share the knowledge
and to spread taxation, Accounting literacy and G.S.T awareness in
view of Indian economy. CMA V.K. Geol, patron and ex-chairman of the
chapter, while narrating the history of the chapter, mentioned about
the chapter having successfully covered a period of 25years. Keynote
address by CMA U.K. Panda, Chairman, PSTCL and presidential address
by the chief guest and guest of honours was deliberated during the

IN S T IT U T E N E WS
inaugural session. The seminar started with enlightening of the lamp by

the chief guest CMA D.C. Bajaj Member, Airport Economy Authority of
India & by guest of honour CMA Anil Kumar Gupta, IRS Commissioner
Customs from Bombay along with executives of the chapter. The pro-
gramme was followed by two technical sessions, where in the experts in
their respective field detailed deliberations. First technical session, GST
was chaired by CMA Anil Kumar Gupta and key speaker, CA Bimal Jain
delivered his enriching deliberations on the topic. Second technical session
was chaired by CMA UK Panda and key speaker CA Eish Taneja shared
his expertise on the concerned theme. CMA JK Puri, past president of the
Institute, CMA SK Bhatt, chairman NIRC, CMA Balwinder Singh, Council
Member, CMA Anil Sharma, treasurer NIRC, CMA Rakesh Bhalla, past chairman NIRC and chairman and representatives
of other chapters also graced the occasion.
The Institute of Cost Accountants of India - Lucknow Chapter

The Chapter and Direct Tax regional training institute jointly organ-
ized workshop on Methods of Cost Determination in various trades
and industry on March 21, 2016 for training of newly recruited
Income Tax Inspectors. The workshop was inaugurated by Deputy
Commissioner, Shri Sanjeev Krishnan and asst. Commissioner,
Rajeev Mohan of Income Tax Department along with Chairper-
son, CMA Anjana Chaddha, Vice Chairman CMA Pawan Kumar
Tiwary, Secretary, CMA Dharmendra Singh Saluja, Joint Secretary,
CMA Neha Sharma, Treasurer, CMA Amit Yadav. Speaker of the
workshop was CMA Pawan Kumar Tiwary, Vice Chairman of the
chapter and he elaborated on various cost determination methods.
The Chapter
organized CMA
Samagam on
success sutras for ‘Make in India’ commenced with lighting of lamp by
Shri Ram Naik ji, Governor U.P., Dr. Laxmi Kant Bajpayee, MLA/ State
President BJP, U.P, CMA S. K. Bhatt, Chairman, NIRC. Chief guest Sri Ram
Naik expressed his views on the role of Cost and Management Accountants
for achieving success of ‘Make in India’. Further he said about the cost
competitiveness and its benefits in Indian economy. First technical ses-
sion was focused
on strengthening
MSMEs . Chief
guest Shri Manish
Goyal, President IIA discussed about the role of professionals for
the best utilization of the resources and assets. Technical speaker
CMA S K Pandey, CFO, J P Infra said that CMA Profession has a vital
role for strengthening MSMEs. CMA Anuradha Gupta also expressed
her views and focus on ‘Waste and Resource Management’. She also
emphasized on best use of natural products and avoiding wastage.
Second Technical Session focused on ‘India’s Urbanization - Smart
Cities’ in which Shri Rahul Nehra, Chairman Smart Village Foundation
emphasized on the development of villages. CMA Pankaj Gupta,

Chancellor, Jindal University, Shri Sudhir Krishna, Former Secy., Min
Min-
istry of Urban Development also shared their significant experiences.
The Chapter and NIRC jointly organized Members Meet on February
9, 2016 to meet and discuss various issues governing profession.
The Institute of Cost Accountants of India - Jaipur Chapter
On March 26, 2016 the Chapter achieved Best Chapter Award in

category ‘A’ of NIRC for the year 2015 in recognition of its com
com-
mendable performance. On behalf of the chapter this award was
received by chairman of the chapter CMA R.K. Bhandari. The award
was received at the National Regional Councils and Chapters Meet
at Munnar, Kerala.
s0uthern India Regional Council
SIRC Women’s Wing organized programme on ‘ICAI National Woman CMA Summit – 2016’ celebrating 150th anniversary of
International Women’s Day on March 8, 2016 on the theme ‘Women-
A key player in Socio-Economic Development’ with Technical Sessions
on ‘Role of CMA Professionals in Startups in Economic Development
and Touching Lives in Social Development’. The Inaugural session was
headed by CMA K Sanyasi Rao, Chairman, SIRC, CMA Manas Kumar
Thakur, Vice President, CMA Kaushik Banarjee, Secretary of the
Institute along with Chairperson CMA Jyoti Satish, Convener Summit
CMA S Subhashini, Patron CMA Latha Venkatesh. Welcome speech
was given by Chairperson CMA Jyoti Satish. The Guest of Honour
was Ms. Jayashree Ravi, Proprietor Shri Palam Silks & Dr. Kaly-
ani Madhiva--
nan, Former Vice Chancellor, Madurai Kamaraj University gave the
Inaugural address. They spoke about the Role of Women and their
different phases in life and work. Vote of thanks was proposed by
CMA S Subhashini. The Techinical Session – I was about ‘Economic
Development – Role of Professionals in Start-up’. It was addressed
by guest speaker Ms. Gayathri Sriram, Managing Director, UCAL
Products Private Ltd, Ms. Subhasri Sriram, CFO, Shriram City Union
Finance Ltd & Dr. R. Shanthi, Convenor Retail Panel, FICCI,TNSC.
They briefed on the theme of Parallel Planning with 4 VCVC – Val--

ues, Commitment, Vision, Continuity Planning to manage Family

and Business and discussed on work life balance for professional
women. The Technical Session – II was on ‘Social Development –
Touching lives’. The Guest speakers were Dr. Saundharya Rajesh,
Chairman – Avatar Group, Kalaimamani Dr. Ambika Kameshwar,
Raasa , Padma Vibhushan Dr.V.Shanta, Chairman, Cancer Institute
(WIA). The Valedictory Session was welcomed by CMA Jyoti Satish,
addressed by CMA V. Kalyanaraman, the Former President, ICAI &
SAFA. The Special address was given by Ms.Judith Lepuschitz, US
Consul General, representative. She spoke about garnering family
support for a Successful Professional life. Qualities of women for Excellence in Profession were highlighted; Faithfulness,
Focus, Persistence, Positivity, Creativeness & Trustworthiness. Women need to look at the bigger picture and come up to
the top. Vote of thanks was delivered by CMA Latha Venkatesh, Patron Women’s Wing.
The Institute of Cost Accountants of India - Coimbatore Chapter
A joint PDP meeting with local chapters of ACA & ACS on Union Budget 2016 was conducted on March 1, 2016. CA Divakar
Vijayasarathy spoke on direct taxes and CA Prasanna Krishnan deliberated on indirect taxes. The tenth batch of industry
oriented training for final students commenced from March 5, 2016 wherein 22 students registered with the chapter. On
the same day the chapter conducted International Women’s Day celebration. The senior manager of Bharatiya Mahila
Bank Ltd., Coimbatore branch, Sri. Santosh Kumar Patra was the chief guest who spoke on the schemes for women in
their bank. Dr Karuna MBBS, DGO (Ireland), FCD (Obs & Gynae) provided valuable tips for good health & hygiene for
women. An open forum discussion on ‘Cost Audit & Records – Exposure Draft’ was held at the chapter on March 11, 2016.
The Institute of Cost Accountants of India - Bangalore Chapter

The Chapter conducted the inauguration of oral coaching classes on February 20, 2016. CMA S. Narasimhan, Director
(Finance) & CFO, M/s. Schneider Electric IT Business India Pvt Ltd.,
Bangalore was the chief guest of the occasion. CMA G. Chidambara,
Chairman-Coaching, gave a brief report on the coaching activities. A
one day workshop on Foreign Trade Policy was held at the chapter on
February 20, 2016. Shri. M.G. Kodandaram, Faculty, National Academy
of Customs, Excise and Narcotics(NACEN Bengaluru) spoke on the
first technical session on ‘Exim Policy Impact on Custom Procedures’
and Shri Prashanth S. Bhat, Consultant, SME Network - Foreign Trade
Advisors, spoke on second technical session on ‘Overview of Foreign
Trade policy - 2015-2020’. A Training Programme was conducted on

‘Maintenance of Cost Accounting Records & Cost Accounting Stand-
ards, Budgeting, MIS, Inventory Management and Statutory Com-
pliance, Cost Management in Public Sectors Enterprises – Strategic
issues and Co-ordination with Departmental Heads’ for the officials
of Karnataka State Public Sector (State PSUs) from February 22
till February 26, 2016. The Chapter organized a Practitioner’s Meet
on March 2, 2016, to discuss on Draft Companies (Cost Records
and Audit) Amendment Rules 2016. A Professional Development
Programme was held on March 5, 2016. CMA Dr. A.S. Gurudath
delivered lecture on ‘Role of CMA in Forensic Accounts and Audit’.
The programme began with a welcome address by CMA Geetha. S,
chairperson of the chapter followed by introduction of chief guest by CMA N. Raveendranath Kaushik, chairman, profes-
sional development. Union Budget 2016-17 Analysis and Discussion was held by the chapter on March 8, 2016. Sri Karthik
Ranganathan, Tax and Corporate Lawyer, spoke on direct taxation
and Sri M G Kodandaram, Faculty NACEN deliberated on indirect
taxation. A Refresher Course on indirect taxation was conducted on
11 and 12 March 2016 at the chapter. Dr. B V Murali Krishna, Joint
Commissioner of Commercial Taxes, Govt. of Karnataka spoke on GST
– Relevance and Present Indirect Taxation. CMA Vishwanath Bhat,
Cost Accountant discussed basic concepts of K-VAT – definition of
dealer etc. CMA Girish K, Cost Accountant spoke on Filing of Returns
(Original/Revised), Taxable Turnover, Exemptions/Deductions etc.
and Registration Procedure, Types of Returns – ER1, ER2, ER3, ERI
Returns, Dealer Return, Self Assessment, Audit, Appeals under Cen-
tral Excise etc. CMA K.S. Kamalakara, Cost Accountant spoke on important provisions of CST-Taxable Turnover, Exemptions/
Deductions, Interstate Sales, E1, Stock Transfer, Deemed Exports,
Statutory Forms – C/E1/H/F, Declared Goods. Shri. M V Sridhar,
Management Consultant, spoke on basic concepts of Central Excise
–Manufacture, Marketability, Dutiability, Goods, Tariff, amounting
to Manufacture etc. Shri Thontaarya, Dy. Commissioner of Com-
mercial Taxes, Govt. of Karnataka, CMA T.K. Jaganathan, spoke on
Rule – 8 of Central Excise Valuation Rules with reference to CAS-4. A
professional development programme was held on March 24, 2016
where CMA
R. Asokan,
Advisor
(Cost), CAB, Ministry of Corporate Affairs, Govt. of India was the
Chief Guest. CMA P. Raju Iyer, Council Member and Chairman, Cost
Auditing and Assurance Standards Board of the Institute gave an
overview of the PD Programme, CMA A.K. Kapoor, Former Additional
Chief Advisor (Cost), Ministry of Finance, Govt. of India, delivered
lecture on ‘Implications and Impact of Standards on Cost Auditing
(Approved Standards)’. .

The Institute of Cost Accountants of India -Cochin Chapter
The Chapter and SIRC jointly organised the first Kerala State Cost Convention on March 28, 2016 on the theme ‘CMA –
DNA of Make in India’s Cost Competitiveness’ inaugurated by Shri Sajiv K Menon, Managing Director, Nita Gelatin India Pvt
Ltd. The inaugural function was presided over by CMA Manas
Kumar Thakur, Vice President of the Institute and delivered
the presidential address. CMA A Selvam, chairman of the chapter
& convener KSCC, CMA Sanyasi Rao, chairman, SIRC, CMA Papa
Rao Sunkara, council member and CMA I. Ashok, council
member delivered felicitation. The first session was handled
by CMA A. N. Raman, Past President, SAFA and delivered on
the topic ‘CMA – DNA of Make in india’s Cost Competitiveness’.
In the second session, Shri. Anand, Head Sales, Kerala
delivered the talk on the topic ‘MCX – Derivatives’. The final
session was a panel discussion led by Dr K.N.Raghavan, [IRS],
Commissioner Customs, Cochin. During the session, CMA Ashok B.
Nawal, council member discussed on ‘Cost Competitiveness in GST Regime’, ADV. Sivadass G., Principal Partner & Country Head,
Lakshmikumaran & Sridharan Attorneys, Bangalore discussed on ‘Indirect taxation challenges - Legal perspective’ and CA N L
Soman, Bharath Petroleum Corporation discussed on ‘Indirect taxation challenges - Industry perspective’.
The Institute of Cost Accountants of India -Hyderabad Chapter
On March 1, 2016 students visited SEBI for better understanding about SEBI and its operations. On March 2, 2016 a joint
meeting held with ICSI, Hyderabad Chapter, All India Federation of Tax Practitioners, SZ & Telangana Tax Practitioner’s Association
on ‘Union Budget, 2016-The Finance Bill, 2016-Analysis’ where speakers CA Shankar Bala, Ernst & Young LLP, India initiated by
indicating the nine-point agenda of the government and CA K.C. Devdas, Practising Chartered Accountant explained in details
the relevant changes in direct taxes.

On the same day, practitioner’s study circle meet on ‘The Draft
Companies (Cost Records and Audit) Amendment Rules, 2016’ was
organized. On March 11, 2016 in house training programme conducted
on ‘Taxation in TRANSCO and GENCO’ and CMA V.S.R.M. Kasyapa,
Practising Cost Accountant & Sri J.V. Rao, Advocate & Tax Consultant
discussed the applicable provisions and the changes as per the latest
finance bill. On March 16, 2016 an evening session on ‘Challenging the
Challenges in Infra Space’ at CMA Bhavan was held by the chapter.
CA J. Ravikumar, CFO, L&T Metro Rail Hyderabad Ltd, the speaker,
highlighted the hurdles in the infrastructure industry with respect to funding, market demand and difficulties in the implementation
of projects. On March 30, 2016 an evening session on ‘Import and Export Procedures’ at CMA Bhavan, Himayatnagar been held
and Sri VBSS Koteswara Rao, EXIM Consultant the speaker and a highly experienced consultant in the procedures of imports
and exports, an author of regular articles in ‘Eenadu’ and also on the advisory panel on the import and export policies to the
government of AP, discussed the various products that contribute to the imports / exports and gave an overview of various
procedures. On 28 and 29 March, 2016 a joint two day seminar with Department of Commerce, Osmania University & Insurance
Institute of India, Bombay was organized on ‘Role of Insurance in Financial Inclusion’ at Business Management Auditorium,
University college of Commerce & Business Management, Osmania University. This was a two-day comprehensively designed
program and had thrown light on all aspects of insurance.
The Institute of Cost Accountants of India -Mangalore Chapter

The Chapter on 9, 16 and 24 February, 2016 organized three career counseling programmes conducted at various colleges in
and around Mangalore addressed by CMA Ullas Kumar Melinamogaru, Chairman of the chapter. During these career awareness
programmes the students were informed about the course, mode of registration, syllabus, its structure, opportunities available
etc.
The Institute of Cost Accountants of India -Mettur Salem Chapter

On March 5, 2016 the Chapter and Salem Chapter of ICSI organized a joint
seminar based on the theme of ‘Limited Liability Partnership’ at ICSI Chapter
premises. CS N Santhanam, Salem in his speech outlined the significance
of Limited Liability Partnership. He deliberated that the concept in India
mostly evolved on the principle of providing a single window solution for
corporate coming from abroad for performing business in India. On March
19, 2016 a joint seminar on ‘Union Budget 2016’ was organized by the
Chapter and the
Salem Chapter
of ICSI. CS N
Santhanam,
Chairman,
Salem Chapter
of ICSI introduced the theme. Chartered Accountant from Salem, Shri
BA Shankar gave a brief outline of the Budget 2016. He discussed the
amendments brought out in the Direct Taxes with particular reference
to Personal Income Tax.

The Institute of Cost Accountants of India -Trivandrum Chapter

The Chapter organized a professional development programme
on March 13, 2016 at its CMA Hall on the theme ‘Start-up
Financing – Challenges and Opportunities’. The Guest Speaker CMA
Aravindakshan K., Asst General Manager, Kerala State Industrial
Development Corporation Ltd. discussed various opportunities
available to young entrepreneurs who are ready to take up
challenges of establishing new ventures and expanding existing
operations. Attempts made by financial institutions, central
government and state governments to ease formalities required
for opening new organization were also elaborated. The meeting
was attended by members and students and concluded with vote of thanks by CMA Joseph Louis, secretary of the chapter.
Western India Regional Council
The Institute of Cost Accountants of India -Ahmedabad Chapter
On March 9, 2016 Students’ Convention 2016 as a part of golden

jubilee had been held at Ahmedabad Management Association
(AMA) inaugurated by Vice Chancellor of Gujarat University, Dr. M
N Patel being the Chief Guest and Dr. Ramakant Prusti, Principal
of B P Patel College of Business Administration, Gandhinagar, the
guest of honour. CMA V H Savalia, chairman of the chapter, CMA
Ashish Bhavsar, vice chairman of chapter, CMA Manish Analkat,
secretary of the chapter, CMA P H Desai, RCM and vice chairman,
WIRC, CMA P D Modh, chairman of Students’ Convention and Oral
Coaching and CMA Prof. S S Shah, Ex-Chairman, WIRC and other
senior CMAs, faculties and administrative staff of the chapter
were present in the convention. On March 18 and 19, 2016 the chapter organized a two day seminar to celebrate its
golden jubilee and theme for the two days seminar was ‘Challenges and Opportunities under Emerging India’. Guest of
honour, Shri Kartikeya Sarabhai aptly drew the attention to the importance of environmental sustainability and Chief
Guest was Dr. Jaynarayan Vyas who gave an insight on the four major challenges against emerging India like Water
Scarcity, Food Scarcity, and ineffective utilization of energy. CMA J B Mistry and Shri Asim Mukhopadhyay delivered
a session on ‘Challenges and Opportunities – Make in India’ and
they highlighted the role of Management Accountants in global
manufacturing. IAS Shri Nagarajan made the realization of the
pains taken by government to rejuvenate the existing scenario of
health care sector in rural areas. On March 19, 2016, in the first
session on ‘Start Up India’ , Mrs. Hina Shah and CSV Mani Iyer
expressed that it’s not the finance that is the constraint but the lack
of mentorship for entrepreneurial attitude. Deliberating on power
sector, Shri P H Rana and Shri M B Kaka said that most dependable
source of energy is sun and that Government has deployed Solar
Policy 2015 to capitalize the same along with an insight on costing
involved in generation, transmission, and distribution of power that
are minutely governed by the power sector. Sanjay Gaden and Vivek Ogera briefed about three major components of Digital
India Scheme- Infrastructure, Services and Governances. They emphasized the importance of Digital Empowerment and
necessity for Digital Transformation. In the valedictory session, CMA Ashok Nawal, Chairman, Indirect taxation Committee

of the Institute briefed all the participants about the professional development and seminar ended with vote of thanks by
CMA Ashish Bhavsar, vice chairman of the chapter. On March 20, 2016 all members and students of the chapter gathered
for the Golden Jubilee Celebration. Dr. Ramzan Surani, a well-known motivational speaker then carried forward the event
with his delightful speech on the theme ‘Let us win’.
The Institute of Cost Accountants of India -Kolhapur Sangli Chapter

A CEP was organized on February 28, 2016 at the chapter premises conducted by CMA D.D. Jadhav on the theme ‘Core Account-
ing Solution’ in the first session and he explained how the on-line cost accounting solutions for sugar industry could be made
applicable in any industry and with what modifications. Second session was conducted by CMA A.B. Karpe, a respected Cost
Accountant working in Co-operative Gokul Dairy in Kolhapur on the theme ‘An Innovative & Novel Approach towards Raw Material
Cost Analysis - especially for Cattle Feed Industry.’
The Institute of Cost Accountants of India -Pimpri Chinchwad Akurdi Chapter

The Chapter conducted a CEP seminar on ‘Budget 2016’ on March 3, 2016
at CMA Bhawan. CMA Rahul Renavikar, Executive Director , Ernst &
Young LLP, Mr. Mitesh Thakkar, Manager, Ernst & Young LLP and CMA L D
Pawar, RCM were the guest speakers in the seminar. In the first Technical
session, CMA Rahul Renavikar explained the background of Budget 2016,
economic policies of the Govt and gave analysis of changes in customs and
service tax. In second technical session, Mr. Mitesh Thakkar gave an in
depth analysis of impact on Direct Taxes as per Budget. In third technical
session, CMA L D Pawar explained the impact on Central Excise due to
Budget. CMA B M Sharma, Former President of the Institute gave a brief
overview of the relevant changes in Budget 2016. On March 12, 2016 the
chapter conducted CEP seminar on ‘Activity Based Costing-Part 2’. In the
technical session, CMA C S Adawadkar, the guest speaker provided a brief overview of the part covered in the first seminar on
activity based costing and then continued to explain how this system can be implemented effectively in organizations. The
chapter on behalf of WIRC conducted Investor Awareness programme for
the benefit of students, members, staff and general public on March 18,
2016 at CMA Bhawan. CMA Arvind Paranjape, the guest speaker explained
the audience the basics of investing and how being a regular investor is
beneficial to the common man.

in Telecom Sector
Foreign Direct Investment (FDI) in Telecom Sector:

The telecommunication industry is considered as the backbone of industrial and economic
development. The industry has been serving through delivery of voice and data services at
rapidly increasing speeds, and thus, has been upgrading human communication. This sector
requires huge investments for its expansion as it is capital-intensive and FDI plays a vital role
in meeting the fund requirements for expansion of the telecom sector. The inflow of FDI has
provided remarkable momentum to the sector in the past few years. In this context, CMAs can
FROM THE RESEARCH DESK
project the cash flows appropriately after considering the uncertainties and risk associated
with the project.
Legal & Advisory services:

A practicing Cost Accountant is authorized to appear for Telecom Disputes Settlement
Appellate Tribunal to resolve the disputes of the service providers. He may even render
advisory services to the companies in telecom industry regarding policy decision, cost reduction,
maintaining the quality, initiating innovative schemes and carry out audit for Metering and Billing
Accuracy through his professional expertise in costing and accounting.
Tariff & Subsidy Mechanism:

Tariff rebalancing and interconnection regulation plays a significant role in reforming the
telecom sector, characterized by rapid technological changes and monopoly service provision.
In this regard, the CMAs can frame cost competitive tariff and subsidy mechanism to ensure
availability of quality service to consumers at reasonable and competitive rates, ensure
financial viability of the sector and attract investments, promote transparency, consistency
and predictability in regulatory approaches across jurisdictions and minimize perceptions of
regulatory risks as well as promote competition in addition to efficiency in operations.
Infrastructural Issues:
The telecom sector is a very capital intensive sector and requires large investments. The
telecom licenses permit the telecom operators to share passive infrastructure such as building,
tower, dark fibre, etc. However the procurement and maintenance of active infrastructure
proves to be a very expensive affair for operators. With the robust growth in the telecom
sector, the government recognized that infrastructure sharing would greatly reduce costs
for the operators. Social Cost Benefit Analysis (SCBA) is an appraisal tool to evaluate the
benefits that a society may get from the proposed project. It is a study of feasibility of a project

in terms of its total economic cost and total economic benefits. Thus CMAs can suggest the
Government by applying SCBA technique to determine whether active or infrastructure
sharing are feasible or not for a proposed project. Again, SCBA also facilitates for apt planning,
decision-making, evaluation and controlling of project costing.
Public-Private Partnership (PPP) Model:

Infrastructural bottleneck has been a grave concern in India in its way of robust pace of
economic progression. In India, private participation in the process of infrastructure development
has received uninspiring response. While private telecom services is a success story in India,
the PPP constitutes a diminutive share in overall infrastructure building despite initiation of
various policy adjustments and sector-specific reform programmes. Development of Telecom
sector with the PPP may have a changing pace in the overall economic development, which
requires an investor friendly environment with commercial viability of the projects. To surmount
the infrastructural bottlenecks, the CMAs can instigate apt strategies to systematize the
infrastructure more effectively, balance the public-private interest, benchmark governance
methodologies, technology, check allocation and apportionment of funds, carry out Risk
Mapping and proper designing of the projects.
Enterprise Risk Management:

Telecommunication subsists in a highly complex and interconnected environment, where
information assurance and cyber security are pivotal to a successful business. Addressing
these challenges begins with the implementation of an information security policy that will
set the foundation for ensuring the confidentiality, integrity, and availability of company
information and communications. Enterprise risk management (ERM) is a process designed to
anticipate and analyze potential opportunities and threats that could affect the achievement
of the organization’s objectives and goal. CMAs are professionally trained and are competent
enough to analyze information system’s performance and carry out Internal Audit for developing
and implementing Enterprise Risk Management and Internal Control systems within the
organizations. With the help of various cost management techniques, CMAs help to identify
the constraint factors that limit the performance of organizations.
Spectrum Management:
The Indian government is aware about the potential of the Telecom sector in advancing
financial access, improving information, and raising productivity in the economy. It has therefore
initiated major flagship programs like Digital India and Smart Cities which primarily depend on
telecommunications infrastructure. India, however, needs to develop its wireless infrastructure
and spectrum policy for this potential to be fully realized. While spectrum availability is a
global challenge faced by all economies, it is particularly a matter of concern in India. Through
affordable devices, reasonable telecommunications fees, and low mobile taxes, the digital sector
can prosper and propel the overall economy. Improvements in these areas can boost Internet
access and provide access to affordable services and diverse content. CMAs may render
advisory services to the companies in telecom industry in taking policy decision, cost reduction,
maintaining the quality, introducing innovative schemes etc., by virtue of expertise in costing and
accounting to attain desired economic growth and societal inclusion.

CUSTOMS proceeding two years is exempted from payment
of duty in excess of 15 % on electronic products
Notifications: Tariff: as specified in the Notification. [Notification No.
l Duty rate on Butter, ghee and butter oil is 27/2016 dated 31st March 2016]
applicable @ 30% till 30th June 2016 & Duty rate of
Wheat is applicable @ 25% till 31st March 2016. l Duty rates on specified goods imported from Japan
[Notification No. 24/2016 dated 28thMarch has been reduce by almost 50%. [Notification
2016] No. 28/2016 dated 31st March2016]
l HRD Diamond Institute Private Limited, Mumbai, Non-Tariff:

Maharashtra can procure cut and polished l I n d i a - A S E A N Tra d e i n G o o d s A g re e m e n t
diamonds without payment of Duty subject to (Safeguard Measures) Rules, 2016 has been
following the conditions of exemption notification. notified. It is to insure the safeguard of domestic
[Notification No. 25/2016 dated 30th industr y from serious injur y them as a
March2016] consequence of increased imports of a good into
I n d i a i n t e r m s o f t h e I n d i a - A S E A N Tra d e
l Duty rates for goods imported by passenger or a Agreement. [Notification No.37/2016-Cus (NT)
member of a crew as baggage, has been increased dated 04th March 2016]
from 30% to 35% [Notification No.26/2016
dated 31st March 2016] l Tariff Value of following imported goods
have been amended as given below:
E C O N O M Y & TA X U P D AT E S
l Indian passport holder coming back to India after

spending more than 365 days in abroad in
Sl. Chapter/ heading/ Tariff value (US $ Per Metric

Description of goods
No. sub-heading/tariff item Tonne)
(1) (2) (3) (4)
1 1511 10 00 Crude Palm Oil 698
2 1511 90 10 RBD Palm Oil 706
3 1511 90 90 Others - Palm Oil 702
4 1511 10 00 Crude Palmolein 711
5 1511 90 20 RBDPalmolein 714
6 1511 90 90 Others - Palmolein 713
7 1507 10 00 Crude Soyabean Oil 767
8 7404 00 22 Brass Scrap (all grades) 3030
9 1207 91 00 Poppy seeds 2533

Chapter/ heading/
Tariff value
Sl. No. sub-heading/tariff Description of goods
(US $)
item
(1) (2) (3) (4)
1 71 or 98 Gold, in any form in respect of which the benefit of 402 per 10 grams
entries at serial number 321 and
323 of the Notification No. 12/2012-Customs
dated 17.03.2012 is availed.

2 71 or 98 Silver, in any form in respect of which the benefit of 502 per kilogram
entries at serial number 322 and 324 of the Notifi-
cation No. 12/2012 - Customs dated 17.03.2012 is
availed.
Chapter/ heading/ Tariff value US $ (Per Metric

Sr. No. Description of goods
sub-heading / tariff item Tonne)
(1) (2) (3) (4)
1 80280 Areca nuts 2599
[Notification No.44 /2016-Cus (NT) dated 31st March 2016]
l Customs (Import of Goods at Concessional Rate of Duty [Notification No.42/2016-Cus(NT) dated 29th March
for Manufacture of Excisable Goods) Rules, 1996 have been 2016]
amended. Now the bond to be executed by the manufacturer
shall be supported by a surety, the word security has been l The Customs Baggage Rules 2016 have been amended.
excluded. Also have added new Rule that reference to the old Highlights of which are as below.
rules in any rule, notification, circular, instruction, standing order, u An Indian resident or a foreigner residing in India or a
trade notice or other order, shall be construed as a reference to tourist of Indian origin can import articles other than
the new rules. used personnel effects & travel souvenir for value upto
[Notification No.39 /2016-Cus (NT) dated 15th March Rs. 50000/- without payment of Duty
2016] u Tourist of Foreign origin can import articles other than
used personnel effects & travel souvenir for value upto
l Kashipur District U.S. Nagar, has been appointed as Rs. 15000/- without payment of Duty.
Customs Port for Unloading of imported goods and loading [Notification No.43/2016-Cus(NT) dated 31st March
of export goods. 2016]
[Notification No.40/2016-Cus(NT) dated 16th March
2016] Anti-Dumping Duty:
l Definitive Anti-Dumping duty is imposed on Phenol
l Kakrawah, Siddharthnagar District, Uttar Pradesh is (2907 11 10), originating in, or exported from the European Union,
appointed as land customs station for the purpose of clearance Singapore and Korea RP. It shall remain in force from 8th March
of baggage, passenger vehicles and tourist vehicles. 2016 to 7th March 2021.

E CO N O M Y & TAX U P DAT E S
[Notification 06/ 2016 - Cus (ADD), dated 08th March shall remain in force from 29th March 2016 to 28th September
2016] 2016.
l Definitive Anti-Dumping duty is imposed on [Notification 12/2016-Cus (ADD), dated 29th March
Polypropylene (3902 10 00, 3902 30 00), originating in, or 2016]
exported from Singapore. It shall remain in force from 8th March
2016 to 7th March 2021. Safeguard Duty:
[Notification 07/2016-Cus (ADD), dated 08th March l Safeguard Duty have been levied on import of Hot-rolled
2016] flat products of non-alloy and other alloy Steel in coils of a width
of 600 mm or more (Chapter Heading 72253090) for import
l Amendments have been made in Notification No. from countries notified as developing countries other than
27/2014-Customs (ADD), dated the 13th June, People’s Republic of China and Ukraine. It shall remain in force
2014, imposing anti-dumping duty on imports of Homopolymer from 14th September 2015 to 13th March 2018. [Notification
of Vinyl Chloride Monomer (3904) originating in or exported No. 1/2016- Customs (SG) dated 29th March 2016]
from Taiwan, the people’s Republic of China, Indonesia, Japan,
Korea RP, Malaysia, Thailand and the United States of America. Circulars:
Amendments are made w.r.t country of export. l It is declared that the domestic passengers who board
[Notification 08/2016-Cus (ADD), dated 11th March international flights in the domestic leg are not required to file
2016] the Customs Baggage declaration form.
[Circular No. 08/2016 dated 8th March 2016]
l Definitive Anti-Dumping duty is imposed on all kinds
of Plastic processing machines or Injection moulding machines l It is clarified that all microphones including Wireless
(8477 10 00) originating in, or exported from Chinese Taipei, microphone sets/systems consisting of one or more wireless
Philippines, Malaysia or Vietnam. It shall remain in force from microphones and a wireless receiver are classifiable under tariff
15th March 2016 to 14th March 2021. item 85181000.
[Notification 09/2016-Cus (ADD), dated 15th March [Circular No. 09/2016 dated 11th March 2016]
2016]
l CBEC has taken-up the task of implementing ‘Indian
l Definitive anti-dumping duty has been imposed on Customs Single Window Project’ to facilitate trade. Following
imports of the ‘2-Ethyl Hexanol (2EH)’ (Chapter Heading - are some highlights,
29051620), originating in, or exported from the European Union, u Online Clearance from Participating Government
Indonesia, Korea RP, Malaysia, Chinese Taipei and United States Agencies (PGAs)
of America. It shall remain in force from29th March 2016 to u Integrated Declaration under Customs Single
28th March 2021. Window Project
[Notification 10/2016-Cus (ADD), dated 29th March [Circular No. 10/2016 dated 15th March 2016]
2016]
l The term “Other person” used in section 28(2) &
l Definitive anti-dumping duty has been imposed on imports 28(6) of the Customs Act,1962 have been clarified as
of Tyre Curing Presses also known as Tyre Vulcanisers or Rubber the one who happens to be co- noticees for in the SCN for their
Processing Machineries for tyres, excluding Six Day Light Curing act of commission or omission other than demand of duty. If
Press for curing bi-cycle tyres originating in or exported from the the noticee pay the duty, penalty & interest, personal penalty
People’s Republic of China. It shall remain in force from 29th levied on this co-noticees will be withdrawn. [Circular No.
March 2016 to 28th March 2021. 11/2016 dated 15th March 2016]
[Notification 11/ 2016-Cus (ADD), dated 29th March
2016] l In the wake of non-genuine transferable duty credit
scrips or DFIA in the market, department have laid down
l Provisional anti-dumping duty on have been imposed procedure for verifyinggenuineness of these scrips at each
on ‘Glazed/Unglazed Porcelain/Vitrified tiles in polished or stage. [Circular No. 12/2016 dated 28th March 2016]
unpolished finish with less than 3% water absorption’ (Chapter
Heading - 6907, Instructions:
6908 or 6914) originating in or exported from the China PR. It l Bill of entr y will be replaced by Integrated

Declaration w.e.f. 1st April 2016. Integrated Declaration to basis of retail sales price. This has been upheld by Hon’ble
includes details as below, Tribunal in case of M/s Bharti Telemedia Ltd. The field formation
u Additional requirement as required by the Participating are instructed to follow the case.
Government Agencies (PGAs) for custom clearance of [Circular No.1020/8/2016-CX, dated 11th Mar 2016]
goods,
u Unique Consignment Reference foridentification l It has been decided to constitute a Sub- committee
of consignment in the international supply chain. of the High Level Committee to interact with Trade & Industry
u New Field is added for Payment Method Code. on imposition of central excise duty on jewellery, chaired by Dr.
u Third party details of person who is going to make Ashok Lahiri. All the associations will be given an opportunity
payment on behalf of importer, to submit representation before the sub-committee in writing
u Authorized dealer code of bank making outward and the all India associations to state their case in person.
payment. Sub-committee will include the issues related to compliance
[F.No. 450/147/2015-Cus-IV dated 31th March 2016] procedure for the excise duty, including records to be
maintained, forms to be filled including Form 12AA, operating
CBEC Notified Exchange Rate for Conversion of Foreign Currency w. procedures and any other issue that may be relevant and submit
e. f, 5th April, 2016 [Notification No.47 /2016-Customs (N.T) Dated 4th the report within 60 days of its constitution.
April 2016] g Till the recommendation of the sub-committee is finalized,
the following shall be followed;
g All the payments of central excise duty will be based on
CENTRAL EXCISE first sales invoice value
g The central excise authorities will not challenge
Notifications: the valuation given in the invoice, not visit the manufacturing
Tariff: units/shops/place of business/residence of the jewellers, arrest
l No new notification or criminal prosecution of any jeweller, no search or seizure of
stocks.
Non-Tariff: g Exporters will be allowed to export on self- declaration
l Following amendments has been made in IGCRD and submission of LUT to customs without ratifying by Central
Rules 2016; excise.
l Effective date for Central Excise (Removal of Goods at g The excise registration of the establishment can be taken
Concessional Rate of Duty for manufacture of Excisable within 60 days from 1st Mar 2016. However, excise duty liability
and Other Goods) Rules, 2016 has been notified as 16th will be effect from 1st Mar 2016, and assessee jewellers
Mar 2016. permitted to make payment for march along with Apr 2016.
l Further for availing the benefit under the rule there [Circular No.1021/9/2016-CX, dated 21th Mar 2016]
will not be requirement of submission of security
while executing the general bond only surety is required. Instructions:
l In the said rules new rule 8 is inserted to interpret l Committee of Commissioners and Committee of Chief
references in any rule, notification, circular, instruction, Commissioners are empowered to review the order passed
standing order, trade notice or other order for the by Commissioner (Appeals) order or order of Principal
Central Excise for Central Excise (Removal of Goods at Commissioner/ Commissioner respectively. It has been clarified
Concessional Rate of Duty for Manufacture of Excisable that there is no provision for reviewing the same order twice by
and Other Goods) Rules, 2001 as the Central Excise the Committee. Committee has been instructed to strictly follow
(Removal of Goods at Concessional Rate of Duty for the provision laid down in law and amount of involved before
Manufacture of Excisable and Other Goods) Rules, 2016. preferring appeals against the order passed.
[Notification No.22/2016-CE (N.T.), dated 15th Mar [Instruction No.F.No.390/Review/36/2014-JC, dated
2016] 17th Mar 2016]
Circulars: SERVICE TAX

l In case Set top box are imported by DTH service providers
which are installed at consumer free of cost, the CVD is Notifications:
required to be paid on transaction value instead of CVD on the l Amendments are been made in Service Tax Return so

as to made incorporate entries w.r.t Swacch Bharat Cess therein. Under clause 46 of section 10 of Income Tax Act, 1962
However revised ST-3 utility is not yet released on ACES site. subject to conditions mentioned therein. [Notification No.
[Notification No.20/2016 ST 8th March 2016] 15 /2016, F. No.196/ 6/2015-ITA-I dated 16th Mar 2016]
l Just provision has been inserted in Rule 7 of the Point of l Double taxation avoidance agreement for taxes on
Taxation Rules, 2012. Now if the service is provided & invoice is income between the Government of the Republic of India
issued before change of taxable liability then even if payment and the Government of the Republic of Indonesia is made
is made after such event then rate prevalent at the time of issue effective from 16th Mar 2016. [Notification No. 17 /2016, F.
of invoice will prevail . [Notification No.21/2016 ST 30th No.503/4/2005-FTD-II dated 16th Mar 2016]
March 2016].
l Method of determination of period of holding of capital
Circular: asset in following cases defined;
l It has been instructed to Banks handling - The period for which any capital asset, other than the
government business to keep their counters open for full day on capital assets mentioned in clause (i) of the Explanation 1 to
30th March 2016 & electronic payment can be done till midnight clause (42A) of section 2 of the Act, is held by an assessee, shall
of 31st March 2016. [Circular No. 191/09/2016 dated 29th be determined in accordance with the provisions of this rule.
March 2016] - In the case of a capital asset, being a share or debenture
of a company, which becomes the property of the assessee
Instructions: in the circumstances mentioned in clause (x) of section 47 of
l The committee of Commissioners can order to Appellate the Act, there shall be included the period for which the bond,
Tribunal to review the order if they found that the same is not debenture, debenture-stock or deposit certificate, as the case
legal or proper. It has been instructed to them that same order may be, was held by the assessee prior to the conversion.
should not be reviewed twice. Proper caution should be taken [Notification No.18/2016, F.No.142/1/2016-TPL dated
in this respect. [F.No. 390/Review/36/2014-JC dated 17th 17th Mar 2016]
March 2016]
l Now charitable or religious trust or institutions can
INCOME TAX: make investment or deposits in “Stock Certificate” as defined
in clause (c) of paragraph2 of the Sovereign Gold Bonds Scheme,
Notifications: 2015, published in the Official Gazette vide notification number
l Depreciation rate for III. Plant & Machinery - relating G.S.R. 827(E), dated the 30th October,
to mineral oil for Oil wells is notified @ 2015. [Notification No. 21 /2016, F. No.142/1/2016-TPL
15% on WDV from 1st Apr 2016. [Notification dated 23rd Mar 2016]
No. 13 /2016, F.No.142/3 3rd March 2016-TPL]
l CBDT notifies Forms Sahaj (ITR-1), ITR-2, ITR- 2A, ITR-3.
l Tax exemption given for five years for 2014-2019 to the Sugam (ITR-4S), ITR-4, ITR-5, ITR-
Karnataka Urban Water Supply and Drainage Board a 6, ITR-7 and ITR-V for AY 2016-17.
Board constituted under the Karnataka Urban Water Supply [Notification No. 24 /2016, F. No.370142/2/ 2016-TPL
and Drainage Board Act, 1973 (Karnataka Act No. 25 of 1974), dated 30th Mar 2016]
in respect of the following specified income arising to that
Board, namely:-
(a) Establishment, administrative and super vision CBDT issues the followings inviting comments from
charges collected as a percentage of project cost prescribed by public:
the Karnataka Public Works Department Accounts Code
of Government of Karnataka; Draft Rules on “Grant of Foreign Tax Credit”
(b) Water charges collection for supply of water to local
bodies and directly to consumers;
Framework of Book Profit or the purpose of levy of
(c) Interest on investments and fixed deposit in banks; MAT under Section 115JB of Income Tax Act,1961
(d) Rent collected for letting out head office building ‘JAL for Indian Accounting Standard (Ind AS) compliance
BHAWAN’; companies.
(e) Forfeiture of earnest money deposit.

From Financial Year 2016-17 certain important changes: 30th November and it is advisable to carry out the internal audit
for confirming the accuracy after reconciling with financial
There are substantial changes, which will be effective from 1st statement. However, if required, revised Annual Return can be
April 2016, which has been enumerated below: filed within one month from the date of filing the original Annual
Return.
❖ Central Excise Rules 2002: Rather it is advisable, no sooner, financial accounts are audited
lRule 8: Payment of duty: An assessee, engaged Annual Return to be prepared and the same can be audited prior
in the manufacture or production of articles of Jewellery, other to submission of Original Annual Return.
than articles of silver Jewellery but inclusive of articles of
silver Jewellery studded with diamond, ruby, emerald or sapphire l Rule 26: Personal Penalty: If the assessee has paid
having the turnover of Rs. 12 Cr. in the year 2015-16 then such duties, interest and 25% of penalty (25% of duty) then no
units will have to pay excise duty on monthly basis after crossing personal penalty can be imposed on Directors, officers who
the turnover of Rs. 6 Cr. have been alleged to be abated for evasion of duty or carrying
goods needed to be confiscated.
l Rule 11 (8): Goods to be removed on Invoice: Now, digitally
signed invoice can be handed over to the transporter while ❖ Cenvat Credit Rules 2004:
removing the goods from the Factory / Warehouse. There is no lRule 2(a): Cenvat on Capital Goods: Now, Output
need to sign / attest the invoice copy. Service Provider can avail Cenvat Credit on wagons of sub-
heading 860692. Needless to say, 50% in first year and 50% in
l Rule 12 (2) : Filing of Returns : From April 2016 onwards, the subsequent year.
only monthly returns in the form of ER-
1/ER-2 or Quarterly Return for SSI Units in Form ER-3 needs to l Rule 2(a): Cenvat on Capital Goods: Cenvat Credit can
be filed. Assesses paying 1% duty will have to file quarterly ER-8 be availed on all office equipments received in the factory on or
Return. Annual Return in the format to be prescribed (not yet after 1st April 2016. Office equipments includes all assets such
prescribed) to be filed on or before 30th November 2016 as furniture & computers that are absolutely essential for
by all the assesses. Kindly note, following returns have been operations. However, it is necessary to receive the same in the
discontinued and hence no need to file. factory for availing the cenvat credit.
“Equipment’ means “The act of equipping or fitting or state of
l ER-4 : Annual Financial Information Statement- in case of being equipped, to supply with whatever is necessary to efficient
duty payment either through PLA or Cenvat or both together is action in the way”.
more than Rs. 1 crore in previous financial year. Equipment received in the factory or office located in the factory
premises, considering the definition of “Equipment” will include
l ER-5 : Information relating to Principal Inputs-in case of Air Conditioners, Coolers, Printers, Photocopiers, Computers
duty payment either through PLA or Cenvat or both together is and anything which equips for running operations. In other
more than Rs. 1 crore in previous financial year. words, even the electrical fittings, telephones, washing
machine, Vacuum Cleaner, etc. will also be entitled for Cenvat
l ER-6 : Monthly return of receipt and consumption of each of benefits.
Principal Inputs- to be filed by the assessee required to submit Cenvat Credit on capital goods i.e. any goods for water
ER-5 pumping which is installed outside of the factory, can be availed.
l ER-7 : Annual Installed Capacity Statement l Rule 2(k): Enhancement of definition of Inputs:
Now, any capital goods having value of Rs. 10,000/- per piece will
It is always advisable to carry out internal audit of monthly be considered as input instead of capital goods, thereby will be
returns submitted and if errors are noticed, it can be corrected entitled for 100% cenvat credit in the first year of receipt itself.
through filing the revised return by end of same calendar month. Further Goods (other than capital goods) used for pumping
In other words, April Return is filed on or before 10th May. of water for captive use will be entitled for Cenvat Credit
Internal Audit shall be carried out immediately after filing the as Inputs. It is compulsory to take credit as Input Credit.
return, so that necessary corrections, if any, required to be made No option to take as Capital goods credit. Compulsory
through revised return which needs to be filed by 31st May. tracking in the credit availment system. In other words cenvat
Similarly, Annual Return required to be filed on or before Credit has to be taken as input and not as capital goods. It is

also to be noted that, if credit under capital goods is taken l Rule 6: Obligation of a manufacturer or producer
then balance 50% cannot be taken in the subsequent year of final products & a provider of output ser vice: Each
considering the period of limitation for availing cenvat credit. assessee who ismanufacturing excisable goods or exempted
Still, it will not be free from litigation. It is also advisable to track in goods, trading, providing taxable output services or providing
ERP in the purchase order itself under the rate column and decide exempted services including non- taxable services will have
the tax code accordingly. to intimate in writing exercising option / selecting the option,
whether such assessee will pay amount to 6% on clearance
l Rule 2(m): Enlargement of scope of Input Service of exempted goods or 7% on value of exempted service or non-
Distributor: Now even office of an out sourced manufacturing taxable service or assessee will opt for cenvat reversal in
unit also will be considered as Input Service distributor accordance with formula prescribed under Rule 6 (3A) of Cenvat
Registration of Input Service Distributor can be obtained by the Credit Rules 2004. This exercise has to be furnished immediately
office / warehouse of out sourced manufacturing unit or address of in the month of April but not later than 5th May (Payment date).
such unit to be included in the ISD Registration for distribution Now, there is no requirement to keep separate books of
of Cenvat Credit to the out sourced manufacturing unit also. accounts for input and input services when manufacturer or
This is very beneficial provision to all assesses which are getting output service provider provides excisable / taxable / non-
goods manufactured under loan licensing or the merchant taxable goods/ service. This is the big relaxation. However, now
exporters. precautions need to be taken to ensure correct reversal under
the said rule. The principles followed for such reversal will have
l Rule 4(5): Conditions for allowing Cenvat Credit: to also match with cost statements and cost accounting policy
Now cenvat credit can be allowed even if jigs, dies & fixtures of the assessee.
directly sent by the vendors to the job workers. There is no
necessity that these goods to be received first at the factory then Rule 6. Obligation of a manufacturer or producer of
only to be sent to the Job Worker. Further, Jigs, dies & fixtures final products and a provider of output service.
can remain with the job workers for three years instead of one
year. There is no need of taking any permission to send the jigs, Rule 6 and Rule 7 of the CENVAT Credit Rules 2004 is
fixtures, etc. which will be returned within amended. The Taxation Committee is in the process of
180 days. But if it is going to be more than 180 days, then finalising a Guidance Note on the same for the benefit
necessar y permission is to be obtained from the office of of Members. Please refer website of the Institute under
Asst. Commissioner / Deputy Commissioner, then such jigs, Taxation Knowledge Portal.
fixtures can be retained at Job workers premises for 3 years.
l Rule 4(6): Conditions for allowing Cenvat Credit:

Contributed by
The cenvat credit on the service tax paid on payment on right of Taxation Committee
natural resources will available as Cenvat Credit proportionately
Institute of Cost Accountants of India
over the period of assignment of such right.
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]

About the Summit:
The WTO, International Affairs & Sustainability Committee of

the Institute organised 2016 International Summit in association
with The Prince’s Accounting for Sustainability Project (A4S) and
CIMA, UK on 10th – 11thMarch 2016 at the Leela Palace Hotel,
New Delhi. The focus of the summit was to highlight the need for
sustainable development and role of CMAs.
Shri Suresh Prabhu Hon’ble Union Minister for Railways,
Government of India; Ms. Jessica Fries, Executive Chairman
-The Prince of Wales’s Accounting for Sustainability Project: Mr. should proactively face the challenges and become sustainable.
Tony Manwaring - Executive Director of External Affairs, CIMA, CMAshas an important role to play in making the organisation
UK, CMA P.V. Bhattad, President - ICAI, CMA Manas Kumar Sustainable.
Thakur, Vice President, ICAI & CMA Sanjay Gupta - Chairman,
WTO International Affairs & Sustainability Committee & CCM,
ICAIinaugurated the two day summit.
CMA P.V. Bhattad, President – ICAI – He gave prominence to

the Accountancy Profession for its contribution, directly and
indirectly, in achieving the sustainable growth. CMAs need to
His Royal Highness The Prince of Wales: His Royal Highness articulate how accountancy as a profession currently facilitates
congratulated the Institute through a video recorded message achievement, and to fill the gap for improvement. One step in
for organizing the Summit and sharing the role of Finance the right direction is to build on a strong and diverse profession
Professionals for making the organisations sustainable. that can continue to develop professional accountants with the
Sustainability practices are needed to preserve the world for relevant skills and awareness to contribute to sustainable and
future generations. By following these practices world community resilient organizations, capital markets, and economies.
is discharging their duty towards all the stakeholders. His Royal
Highness also praised the Institute for encouraging the CEOs /
CFOs to work for sustainability and embed sustainable practices
in their organisation’s DNA.
Mr. Suresh Prabhu, Hon’ble Union Minister for Railways,

Government of India, the Chief Guest of the Summit admired the
Institute for organizing summit and highlighted the role of finance
professionals in the sustainable growth of the organisations and
the country. He highlightedthe sustainable practices Indian
Railways currently following and the role of Citizens in making
the country clean and sustainable. He said that organisations Mr Sanjay Gupta, Chairman, WTO, International Affairs

& Sustainability Committee & CCM – He welcomed all the speaker of the 1st technical session on “Drivers of change: risks,
participants &dignitaries and initiated the event by highlighting opportunities” andspoke about the A4S CFP Leadership Network
the theme of the event. He gave emphasis on the role and Guidance Materials, the role of A4S in guiding the finance
importance of CMAs in making the organisation sustainable in professionals in making sustainable economy.She explained the
long run. topic through an exercise with the participants. The exercise was
The two day summit was alienated in six different sessions focused on Finance function activities that need guidance to
and all the speakersimparted knowledge on different topics embed sustainability.
like Drivers of change – Risk & Opportunities, The Sustainable
Development Goals and the Impact on Business, Responding
to the challenge - How the finance team can play a lead role in
moving to a Sustainable Economy, Powering up: Better decision
making by joining dots, Practical Actions- An Exploration of the
A4S CFO Leadership Network Guidance Materials& Integrated
Reporting.
Mr. Tony Manwaring, Executive Director of External Affairs

– CIMA:He is leading on global communications, public policy
and advocacy programmes. He spoke on Powering up: Better
decision making by joining dots wherein he highlighted the role
of the Management Accountants in making the world sustainable.
He elaborated the need of management accountants to make
organisation more efficient and thus reducing the wastage of
Mr. Abdul GaniKohli, Ex-Hon’ble Minister of State for resources. This will enable the organizations to become more
Horticulture, Rural Development, Transport, Jammu& Kashmir sustainable. He also highlighted the role of CIMA in propagating
- He was the Guest of honor and touched upon the need of sustainability practices in the world community.
Sustainable Economy in a state like Jammu and Kashmir. He
further pointed out the role of sustainable economy in attracting
the investment which will further lead to economic development.
He also highlighted the role of finance professionals like Cost
Accountants in this area.
MsChristine Brogan, Director - The Prince’s Accounting for

Sustainability Project (A4S): She is responsible for day-to-day
management of A4S, in particular the A4S CFO Leadership
Network.She was the speaker in the 1st session on “Drivers of
change: risks, opportunitiesand introduced the theme of the
session with an insight about the Accounting for Sustainability
Project.
Ms. Jessica Fries, Executive Chairman - The Prince’s Accounting
for Sustainability Project (A4S): She is the Executive Chairman MsAmanda Mackenzie, Executive Director -Project
of The Prince’s Accounting for Sustainability Project (A4S).and Everyone:She is from the Executive Committee of Aviva to Film
has been responsible for establishing the International Integrated Director and Comic Relief founder Richard Curtis & team as
Reporting Council (IIRC), as well as A4S’s CFO Leadership Executive Advisor Non-Executive Chair for ‘Project Everyone’.
Network and capital markets programme. She was the key note She was the key note speakerin the session on “Sustainable

market. In Today’s scenario market are very dynamic, in
caseorganisations do not follow sustainable practices, they may
Development Goals and the Impact on Business”. She highlighted find themselves out of the market.
the goals and objectives for making the society sustainable.
Prof. C Raj Kumar, Professor and Vice Chancellor, O.P Jindal

CMAManoj Mishra, CMD, National Fertilizers Limited–He Global University–He highlighted the necessity of sustainable
was the guest of the honor of the thematic session. He shared business practices and the role of universities in propagating
sustainability practices at being followed at NFLand talked about sustainable practices. Universities world overare playing
the importance of sustainable practices and the need for using important role in enhancing the skills of the professionalsfor
the resources judiciously. He also stressed on increasing the facing the uncertain or unforeseen future.
agricultural productivity and to improve the focus on agriculture
and its Sustainability for the country like India.
Ms. Vrushali Gaud, CII –Shehelp companies bridge the gap

between business and sustainability initiatives by leveraging
the knowledge, resources and services offered by CII-CESD. She
CMA Rajeev Mehrotra,CMD, RITES Ltd -He inaugurated the was the key note speaker and talked about the importance of
Summit along with other dignitaries. “Integrated Reporting”in conjunction withthe responsibilities of
the finance professionals. She also highlighted the role of IR lab
Mr. P. B. Balaji, Chief Financial Officer - Hindustan Unilever in the Integrated Reporting filed.
Limited: Hewas the key note speaker of the session “Responding
to the challenge: How the finance team can play a lead role in
moving to a Sustainable Economy”. He highlighted the role of the
Finance Professionals in the sustainable Economy and making an
Organisation sustainable.
Mr. Ramesh Subramanyam, CFO, TATA Power Company Ltd–He

highlighted the sustainable practices which are being currently
followedin Tata Group. He also stressed on how the corporate
should follow sustainable practices to remain in the CMA P.V.S. Jagan Mohan Rao, CCM – He moderated first

session of the summit on the theme “Drivers of change: risks,
opportunities”. He introduced the theme of the session. He said
every change in the organisation is associated with consequential
risk and opportunities. The decision maker has to identify the
opportunities and manage the risk.
CMA Balwinder Singh, CCM –He moderated the 4th technical

session of the summit on the theme of “Powering up: Better
decision making by joining dots”. He highlighted the necessity of
CMA P Raju Iyer, Chairman, CCM- He welcomed all the proper coordination for attaining the organization’s goals.
dignitaries on the 2nd day of the summit. He thanked the audience
& the speakers for their participation and making the summit CMA Sanjay Gupta thanked A4S, CIMA & the Sponsors for
as a prolific event. He concluded the session by highlighting the their support. He said that India can emerge as the centre for
important role of CMAs in promoting sustainability practices in international trade, with cost competitiveness as the strategy.
any Organisation. Sustainable development defines the needs and aspirations
of the present without compromising the ability of the future
generations. He also said that the future world would be a barren
land if we continued to ignore the idea of sustainable growth and
non-judiciously deplete the resources of the world is gifted with.
Highlights of the Events:
i Message from His

CMA Dr. I Ashok, CCM–Hemoderated the 2nd session of the Royal Highness
summit on the theme of “The Sustainable Development Goals Prince of Wales
and the Impact on Business”. He talked about the impact of e l a b o ra t i n g t h e
Sustainable development goals in the businesses. Setting realistic importance of
goals can have positive impact on the business. Sustainability and
sustainable practices
for the world
community
i Need for sustainable
development
i Making organizations
more sustainable by
reducing the wastage
of resources
CMA Avijit Goswami, CCM–He moderated the 3rdsession of i Role of the Management Accountants in making the
the summit on the theme of “Responding to the challenge: How sustainable world
the finance team can play a lead role in moving to a sustainable i Need for sustainable business practices for facing the
Economy”. He highlighted the fact that the finance team has an uncertain future
important role in moving organizations to a sustainable economy. i Necessity of the increase in agricultural productivity and
The finance professional sets targets for the enterprise and are relation between agriculture and Sustainability for the
responsible for the execution of these goals. country

CMAs can play to create a sustainable economy. CMAs work as
key decision maker in business organization. They arewell placed
to make the organization sustainable. They make policies and
control system which are feasible for organisational environment
and unforeseen situation. Organisations with CMAs as key
decision maker make use of scare resources judiciously in a most
cost effective way thereby having a better return on investment.
These efforts not only increase their profit margins in the long run,
but also make them sustainable in the today’s dynamic market.
Henceforth, for a sustainable economy, we require and should
acquire CMAs.
Need for Sustainabilityin Accounting Practice
For 200 years or more, globalization and industrialization Sustainability doesn’t stands only for CSR activities, but also
provided many societal benefits. They have also led to sustainable makes us understand the most cost effective way to utilize the
development dilemmas, including inequality and social challenges resources available. This will enable the organization to serve all
in the supply chain, climate change, and other ethical and moral its stakeholders as well.
challenges.The role business plays in achieving the Goals is equally The recent C-suite research conducted by CIMA and AICPA
critical as the role played by governments, non-governmental demonstrates the steps to be taken up by organisations in terms
organizations, civil society, and philanthropies. The Goals set of integrating sustainability into their strategy and decision
targets to enable us to respond to these challenges and, as such, making to create value for the short, medium and long-term.
represent an agenda for people, planet, and prosperity. The most important point to be considered in the whole summit
was the importance of integrated reporting and the responsibility
Few Things to Take away from the Event of the finance professionals.
The Summit was attended by around 150 global delegates and
2016- International Summit explored the significant role the was a grand success.

Name of the Date of
Chapter Activity Activities Undertaken in the World Earth Week
The Chapter organized a cycling excursion to promote green environment and had released
the Knowledge Pack on “Contemporary Issues in Environmental Accounting & Auditing”
Hon’ble Member of Parliament by Shri Anil Shirole in presence of CMA Dr.P.V.S.Jagan Mohan
Rao, Chairman of Corporate Laws, Governance and Corporate Sustainability Committee,
Pune 16 April, CMA Amit Apte, Council Member, and CMA Amit Shahane, Secretary of Pune Chapter.
th
Chapter 2016 The Chapter also organized the students elocution programme on climate change and role of
CMAs. CMA Dr.P.V.S.Jagan Mohan Rao, Council Member,CMA Amit Apte, Council Member,
CMA Amit Shahane, Secretary of Pune Chapter and Shri Omkar Medhekar, Faculty of the
Pune Chapter were also present.
On this occasion CMA Manas Thakur, Vice President of the Institute, CMA Dr. P.V.S. Jagan Mohan Rao,
Chairman of the Corporate Laws, Governance and Corporate Sustainability Committee and CMA Sanjay
Gupta, Council Member were present along with CMA Anjana Chadha, Chairperson of Lucknow Chapter,
CMA Pawan Tiwari, Vice Chairperson, CMA Dharmendra Singh Saluja, Secretary, CMA Neha Sharma ,Jt.
Secretary, and CMA Amit Yadav,Treasurer were present.
CMA Ranjeet Singh, CMA Ankur Verma, CMA Shakambhari Tiwari and other members and students
gathered at 1090 Chauraaha Lucknow and proceeded for Green walk and cycling towards Janeshwar
Lucknow 17th April, Park, Lucknow. People passing by were educated and motivated to save greenery on Earth and to plant
Chapter 2016 trees in their surroundings.
In the Seminar on updates on Companies Act 2013 with focus on accounts, audit, NCLT, Board issues were
addressed by CMA Dr.P.V.S.Jagan Mohan Rao with active participation. CMA Members were educated by
CMA Dr.P.V.S. Jagan Mohan Rao about environmental accounting, sustainability and meditation.
Lucknow Chapter also participated in Green Earth celebration organized by Prithvi Innovation of our mem-
bers CMA Anuradha Gupta at GSI, Lucknow. Saplings were distributed on the occasion by CMA Anjana
Chadha, Chairperson and CMA Dharmendra Singh Saluja Secretary to all the delegates present in the event
on behalf of ICAI - Lucknow Chapter.
Eastern Saplings were planted at EIRC Campus by CMA Niranjan Mishra, Council Member, CMA
India 17th April, Biswarup Basu, Council Member alongwith CMA S.P.Padhi, Chairman of EIRC, CMA Pranab
Regional 2016 Kumar Chakraborty, Secretary of EIRC, CMA Ashis Banerjee, Treasurer of EIRC and CMA Che-
Council ruva Venkata Ramana, Member of EIRC.
CMA Dr.P.V.S.Jagan Mohan Rao, Chairman of Corporate Laws, Governance and Corporate
Sustainability Committee gifted a sapling to Shri Jogu Ramanna, Hon’ble Minister for Forest
Environment & Backward Classes Welfare Government of Telangana. The Hon’ble Minister was
Hyderabad 20 April, presented with the Knowledge Pack for such purpose. CMA D.Surya Prakasam, Vice Chair-
th
Chapter 2016 man, Hyderabad Chapter of Cost Accountants along with Shri C. Prasad Rao, Assistant Direc-
tor of the Hyderabad Chapter of Cost Accountants were also present. Hon’ble Minister was
also apprised about the activities of the Institute in particular about the CMA course.
Howrah 20th April, The Management Committee planted saplings on the occasion of World Earth Week.
Chapter 2016.
A seminar on the Role of CMA in Companies Act 2013 (Focus areas Chapter Accounts of Com-
Western pany Chapter IX, Audit & Auditors Chapter X, Governance & NCLT Highlights). A slide show on
Indian 21st April climate change and role of CMAs were also presented The speaker for the programme was
Regional 2016 CMA Dr.P.V.S.Jagan Mohan Rao, Chairman of Corporate Laws, Governance and Corporate
Council Sustainability Committee.
The Chapter observed the World Earth day and organised a meeting on the topic “Role of
Coim- 22nd Professionals in Environmental Reporting”.CMA Subramanian.R, Practicing Cost Accountant,
batore April, Chennai explained the concept of Environmental Reporting, its Contents, Guidelines for pre-
Chapter 2016 paring the Report and Advantages & purposes of the Report. Finally, he presented a Teaser on
Integrated Report – the new approach to Corporate Reporting.
CMA Ch. Venkata Ramana, Member EIRC of ICAI as Chief Guest/ Speaker,CMA Prasanta
South Oris- 22nd April Kumar Pani, Secretary of the Chapter,CMA Ananda Sahu, Vice-Chairman of the Chapter and
sa Chapter 2016 CMA Narasingha Chandra Kar, Treasurer of the Chapter as speaker were all present for the
programme.
South- In view of the “World Earth Day” on will be held on 22nd April, 2016 a programme on “Global
22nd
ern India Warming” was organized. The Speaker for the programme was Shri R Thirulogachandran, Go-
April,
Regional Green Champion, Blue Dart Group, Chennai.
2016
Council

(STATUTORY BODY UNDER AN ACT OF PARLIAMENT)
EXAMINATION TIME TABLE & PROGRAMME –JUNE 2016
PROGRAMME FOR SYLLABUS 2012
Day, Date Intermediate Final
9.30 A.M. to 12.30 P.M. 2.00 P.M. to 5.00 P.M.
www.icmai.in
& Time
Saturday, Corporate Laws and
Financial Accounting
11th June, 2016 Compliance
Sunday, Laws, Ethics and Advanced Financial
12th June, 2016 Governance Management
Monday, Business Strategy &
Direct Taxation
13th June, 2016 Strategic Cost Management
Tuesday Cost Accounting & Tax Management
14th June, 2016 Financial Management & Practice
May 2016
Wednesday, Operation Management Strategic
15th June, 2016 and Information Systems Performance Management
Thursday, Corporate Financial
Cost & Management Accountancy
16th June, 2016 Reporting
Friday, Cost &
Indirect Taxation
17th June, 2016 Management Audit
Saturday, Company Accounts and Financial Analysis &
18th June, 2016 Audit Business Valuation
EXAMINATION FEES
121
Group (s) Final Examination Intermediate Examination
One Group (Inland Centres) `1400/- `1200/-
(Overseas Centres) US $ 100 US $ 90
Two Groups (Inland Centres) `2800/- `2400/-
(Overseas Centres) US $ 100 US $ 90
1. Application Forms for Intermediate and Final Examination has to be filled up through online as well as 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. 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 Module of IDBI Bank).
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 31 st March, 2016 and with late fees of Rs. 300/- is 10th April, 2016. 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.
5. The Finance Act 2015 will be applicable for the Subjects Direct Taxation, Indirect Taxation and Tax Management & Practice under Syllabus 2012 for the purpose of June 2016 term of Examination.
6. The Companies (Cost Records & Audit) Rules 2014 will be applicable for Paper 10 - Cost & Management Accountancy (Intermediate) and Paper 19 - Cost and Management Audit (Final) for June 2016
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) to the extent notified by the
Government at least six months prior to the date of the examination.
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,
The Management Accountant

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.
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, 2016.
* For any examination related query, please contact [email protected]
A. Das
Director (Examination)
(STATUTORY BODY UNDER AN ACT OF PARLIAMENT)
EXAMINATION TIME TABLE & PROGRAMME – JUNE 2016
FOUNDATION COURSE EXAMINATION
Day, Date & Foundation Course Examination Syllabus-2012

Time 2.00 p.m. to 5.00 p.m.
15th June,2016 Fundamentals of Economics & Management
Wednesday
16th June,2016 Fundamentals of Accounting
Thursday
17th June, 2016 Fundamentals of Laws & Ethics
Friday
18th June, 2016 Fundamentals of Business Mathematics & Statistics
Saturday
Examination Fees
Inland Centres ` 1200/-

Foundation Course Examination
Overseas Centres US $ 60
1. The Foundation Examination will be conducted in Offline, descriptive (Pen & Paper) mode only, each paper of 100
marks and for 3 hours duration.
2. Application Forms for Foundation Examination can be filled up through online or in offline modes.
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. 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 20 th April, 2016 and with late fees of
Rs. 300/ is 30th April , 2016. 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 30th April, 2016.
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 of August, 2016
A. Das
Director
(Examination)
* For any examination related query, please contact [email protected]

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Organized by
Directorate of Research & Journal

The Institute of Cost Accountants of India
(Statutory Body under an Act of Parliament)
in association with
NATIONAL INSTITUTE OF
SECURITIES MARKETS
An Educational Initiative of SEBI
National Institute of Securities Markets

(An Educational Initiative of SEBI)
Behind every successful business decision there is always a CMA

Registered KOL RMS/139/2016-18
Publication date: 10 May 2016 RNI 12032/66
Toll Free:1800 345 0092 /1800 110 910 Behind every successful business decision, there is always a CMA www.icmai.in
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THE JOURNAL FOR CMAs

THE INSTITUTE OF COST ACCOUNTANTS OF INDIA

Behind Every Successful Business Decision, There is always a CMA

The Management Accountant 2 May 2016 www.icmai.in

www.icmai.in May 2016 3 The Management Accountant

DISCLAIMER SW CHH BHARA

The Management Accountant 4 May 2016 www.icmai.in

www.icmai.in May 2016 5 The Management Accountant

The Management Accountant 6 May 2016 www.icmai.in

When life is sweet, say thank you and celebrate. And

My Dear Professional Colleagues,

Representation to expand the coverage of Cost Rules

www.icmai.in May 2016 7 The Management Accountant

The Management Accountant 8 May 2016 www.icmai.in

www.icmai.in May 2016 9 The Management Accountant

Audit of Treasury Functions of Commercial Banks i On personal meeting of Vice-President of the

Research and Journal Department Other Initiatives

i My sincere appreciation to the Karnataka CMAs

The Management Accountant 10 May 2016 www.icmai.in

www.icmai.in May 2016 11 The Management Accountant

The Management Accountant 12 May 2016 www.icmai.in

www.icmai.in May 2016 13 The Management Accountant

The Management Accountant 14 May 2016 www.icmai.in

www.icmai.in May 2016 15 The Management Accountant

www.icmai.in May 2016 17 The Management Accountant

3. The Reform Measures

The Management Accountant 18 May 2016 www.icmai.in

www.icmai.in May 2016 19 The Management Accountant

The Management Accountant 20 May 2016 www.icmai.in

4.7. Full Mobile Number Portability

www.icmai.in May 2016 21 The Management Accountant

(Table-2): Share of Telecom Sector in India’s GDP (Rs. ’000 crore)

The Management Accountant 22 May 2016 www.icmai.in

5. Opportunities for future growth References

www.icmai.in May 2016 23 The Management Accountant

grant various types of subsidy. For the last financial year

The Management Accountant 24 May 2016 www.icmai.in

The Management Accountant 26 May 2016 www.icmai.in

2002-03 1653.61 300.00 300.00 2300.00 -946.39

2003-04 2143.22 200.00 200.00 2300.00 -356.78

2004-05 3457.73 1314.59 1314.59 1765.68 377.46

2005-06 3215.13 1766.85 1766.85 582.96 865.32

2006-07 3940.73 1500.00 1500.00 0 2440.73

2007-08 5405.80 1290.00 1290.00 0 4115.80

2008-09 5515.14 1600.00 1600.00 0 3915.14

2009-10 5778.00 2400.00 2400.00 0 3378.00

2010-11 6114.56 3100.00 3100.00 0 3014.56

2011-12 6723.57 1687.96 1687.96 0 5035.61

2012-13 6735.46 625.00 625.00 0 6110.46

2013-14 6735.46 2163.45 2163.45 0 5732.94

2014-15 7538.70 2086.98 2086.98 0 5451.72

TOTAL 70120.03 21337.29 21337.29 6948.64 41834.10

l Booked figures as per DoT accounts.

www.icmai.in May 2016 27 The Management Accountant

The Management Accountant 28 May 2016 www.icmai.in

SCHEME 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16*

MARR-A 1481.3 1321.8 1385.58 402.21 37.05 -4.79 0.3

MARR-B 527.83 135.46 4.23 0.02 9.64 -0.43 0

MOB-I 510.44 916.78 870.83 947.49 644.05 99.74 9.88