Monday, July 14, 2014

Is the cost auditing regulatory measure of the GOI, negatively affect the real estate, healthcare and educational sector

At the first glance, it seems rather radical of the GOI to enact a directive and ordinance requiring a strict cost audit and check on formerly untouched and unregulated sectors of organizations that are into housing, Health care and Education.

The GOI prophesizes that this move will bring in a much needed transparency in these sectors to quell abate and allay the practices of price fixing and exploitation of consumers who may be real estate tenants, or patients or students of the so- called paid management quota seats.
The notification has at the same time created a strict schedule by means of which the costs of production (as applicable), the margins earned, sales and operation activities on a monthly, quarterly or annual basis; should be maintained in cost records.

A senior member of the institute for chartered accountants remarked that the move would help consumers by making the market more approachable to them, and prevent exploitative situations from occurring.

However, other sectors like automobiles, electronics, electrical, paint, paper, textiles and glass would be spared from this move.

The Indian IT outsourcing and servicing sectors did not have such restrictions on them historically speaking and bloomed and mushroomed into the bulwark of the national economy nowadays.  However the manufacturing and export sector did not have such restrictions on them as a result of which China is today known as the world’s factory precisely because of less impingement of the Chinese government.

Nevertheless, in the past the GOI created four broad a sector on the basis of which auditing was carried out. The first namely were strategically important companies that were into atomic, defense and space industries, the second category includes companies that were directly regulated by the central government. These include logistics; big telecom; transmission and supply of electricity, industrial metals, roads, agro-industrial manufacturing units amongst many others of similar ilk. Furthermore cross disciplinary companies having a turnover of 50 Crores and above would be candidates for the audit given that this measure would hope to fix toll charges.

In the categories after these were companies that provided public service directly in the form of education, pharmaceuticals, hotels, health care and the like.

By close observation it would seem that this draconian ordinance is fit for the socialist India of the 60’s and the 70’s and not for a modern emerging corporate intensive power that our country has to become in order not just to propagate it’s reason of existence but also to defend itself in times of need.

The government should not act as judge, jury and executioner for the flower of the youth of India who derive a livelihood from these very companies. Don’t you think?

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