Prof D Mukherjee
Of late, it is in public domain that Government of India is considering to frame policy and develop a robust methodology for timely estimate of cost of logistics likely to be incurred by the Indian trade, industry and commerce for the first time in the annals of the Indian constructive and pragmatic policy making avenue which is certainly a welcome initiative. Logistics cost is one of major elements of cost structure of product and service produced and distributed by the firms which has consequential impact of product pricing.Michael E. Porter, the renowned Harvard Professor of Strategy attached utmost importance to ‘Cost Leadership’ in his three forces generic strategy for business sustainability. The Department for Promotion of Industry and Internal Trade (DPIIT), Government of India is scheduled to engage the National Council of Applied Economic Research (NCAER) for the task of estimating logistics cost. NCAER is the competent organization to assist the policy making authorities in this regard. However, Government may also consider engaging the Institute of Cost Accountants of India (ICMAI) along with NCAER in the survey to estimate the cost of logistics to be incurred by the Indian firms as ICMAI’s expertise in cost identification, measurement, and planning for products and services aligns perfectly with the needs of this survey.
The genesis and professional relevance of ICMAI can be traced back to pre-partitioned British-India era when government contracts were awarded on the basis of cost-plus principles requiring thorough examination of the costs and different elements of cost to be included in the price and cost as common denominator of performance measurement became more prominent during the World-War II leading to the establishment of the Institute of Cost and Works Accountants of India (ICWAI) on 14th June, 1944 under the then Companies Act, 1913 and later received the assent of the President of India on 28th May, 1959, the Cost and Works Accountants Act(Act No 23 of 1959), ICWAI(today’s ICMAI) become a statutory body for promotion and regulation of Cost and Management Accountancy (CMA) Profession. India is pioneer and champion of coining the development and implementing the theory and principles of cost audit by enactment of the Companies (Amendment ) Act, 1965 (Act No 31 of 1965) whose basic objective was to make systematic identification, measuring, recording , analysing and reporting cost information to the regulators including strategic sectors periodically and that became the source of authenticate and reliable cost and financial information for the purpose of strategic decision making. The Ministry of Corporate Affairs (MCA), Government of India is the administrative arm of this autonomous statutory body of cost and management accountants. The cost audit reports are submitted to MCA which eventually shares the cost and financial data in product-wise, region-wise as reported by the cost auditor(s) as when required with Director General of Corporate Affairs, Registrar of Companies, Serious Fraud Investigation Agency, Central of Board of Direct and Indirect Taxes, National Pharmaceutical Pricing Authority, Director General of Trade Remedies etc.These cost and financial data are the authentic source of information for pricing goods and services and cost identification, measurement and reporting are the fundamental continents of the USP of ICMAI besides assisting the management of an organization by providing information for making strategic decisions including framing perspective plans for long term sustainability under cut-throat competition prevailing both in domestics and international market.
Logistics cost estimation involves identifying, measuring, and reporting costs from origin to destination, as well as analysing costs on a product-wise and geographical region-wise basis, and even at a more micro level. Including ICMAI in this survey would ensure that the information gathered is not only accurate but also strategically significant for decision-making.The DPIIT’s focus on India’s ranking in the World Bank Logistics Performance Index underscores the importance of developing a robust methodology for timely measuring logistics costs and identifying methods for cost reduction. By involving ICMAI, which specializes in cost management, the Government can better understand where waste and bottleneck costs occur, leading to more effective strategies for cost savings.While NCAER is suited for economic surveys, adding ICMAI to the mix would add strategic significance to the logistics cost identification, measurement, and planning process. This collaboration could enhance companies’ competitiveness in the market and improve India’s ranking in the World Bank’s Logistics Performance Index. The synergy between NCAER and ICMAI is expected to yield more effective results than either organization could achieve alone. Therefore, it is recommended that the Government of India seriously considers involving both organizations in this important survey to derive the maximum benefit for the country’s logistics sector and overall economic performance.
The synergy between ICMAI and NCAER would bring several benefits to Indian companies, regulatory authorities, and Government departments. Firstly, ICMAI’s expertise in cost management would provide Indian companies with valuable insights into their logistics costs. This would enable companies to identify areas of inefficiency and implement cost-saving measures, thereby improving their overall profitability and competitiveness. Secondly, the collaboration would benefit regulatory authorities and Government departments by providing them with accurate and timely data on logistics costs. This information would help them formulate policies and regulations that promote efficiency in the logistics sector, ultimately benefiting the economy as a whole. Additionally, the involvement of ICMAI and NCAER would enhance the credibility of the survey findings. Both organizations are well-respected in their respective fields, and their involvement would lend legitimacy to the survey results, increasing their acceptance among stakeholders. Overall, the synergy between ICMAI and NCAER would lead to more informed decision-making, improved competitiveness for Indian companies, and more effective policies for regulatory authorities and Government departments, ultimately benefiting the Indian economy as a whole. The collaboration between ICMAI and NCAER would significantly contribute to improving India’s ranking in the World Bank’s Logistics Performance Index (LPI). Firstly, by accurately estimating and analysing logistics costs, Indian companies would be better equipped to reduce inefficiencies and improve their overall logistics performance. This would lead to a more efficient and competitive logistics sector, which is a key factor in determining a country’s LPI ranking. Secondly, the collaboration would help identify key areas where India lags behind in terms of logistics performance. This information could be used by policymakers to formulate targeted strategies to address these deficiencies, thereby improving India’s overall logistics infrastructure and efficiency.
Furthermore, the collaboration would enhance the credibility and reliability of India’s logistics data, which is an important factor in the LPI ranking methodology. This would increase the likelihood of India’s ranking improving in future editions of the index. Overall, the synergy between ICMAI and NCAER would not only benefit Indian companies and regulatory authorities but also contribute to improving India’s overall competitiveness and ranking in the World Bank’s Logistics Performance Index, ultimately leading to a more efficient and competitive logistics sector in India. ICMAI’s involvement in the estimation of logistics costs for the World Bank’s Logistics Performance Index (LPI) would be particularly beneficial due to its long-standing expertise in data authentication. For over six decades, ICMAI has been at the forefront of ensuring the accuracy and reliability of financial and cost data. The institute has developed robust processes and methodologies for data authentication, which are widely recognized and respected. One of the key strengths of ICMAI is its ability to authenticate data through rigorous verification processes. This ensures that the data provided by ICMAI is accurate, reliable, and free from errors or biases. Such authenticated data are crucial for policy makers and strategy formulators, as they rely on accurate information for decision-making.
ICMAI’s authenticated data are regularly used by policy makers and strategy formulators for a variety of purposes. For example, in the context of logistics costs estimation, ICMAI’s authenticated data would provide policymakers with a reliable basis for formulating strategies to improve India’s logistics performance. By using ICMAI’s data, policymakers can be confident that their decisions are based on accurate and reliable information, leading to more effective policy outcomes. Moreover, ICMAI’s expertise in data authentication extends beyond financial and cost data. The institute has also been involved in authenticating data related to various other fields, such as performance metrics, operational data, and compliance data. This wide-ranging expertise makes ICMAI a trusted partner for policy makers and strategy formulators across different sectors. ICMAI’s involvement in the estimation of logistics costs for the World Bank’s LPI would bring significant benefits. The institute’s expertise in data authentication, built over several decades, would ensure that the data provided is accurate and reliable. This, in turn, would help policy makers and strategy formulators make informed decisions, leading to improvements in India’s logistics performance and overall competitiveness. Therefore, Government may ponder over the issue on effecting synergic collaboration of NCAER and ICMAI for strengthening survey and estimating methodology.
(The author is a Bangalore based Educationist and Management Scientist)
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