‘Ethical practices and good corporate governance can boost GDP’

The Centre is looking at extending financial restructuring plan (FRP) for the State Power Distribution Companies as previous FRP schemes have actually not changed the situation on the ground and failed to bring about any significant improvements

Good ethical practices and corporate governance norms followed by the companies can boost the gross domestic product (GDP) by 1.5-2 per cent much like the potential spinoff benefits of the goods and services tax (GST), a statement of Assocham quoting Union Power Minister, Piyush Goyal said.

“If we are going to run our organisations with defined processes and a degree of serious and ethical guidelines which will always have an element of integrity at the core, to my mind getting a 1.5-2 per cent bump in the GDP, good additional growth in the GDP is certainly not impossible, very much achievable and possibly one could do even better than that,” said Mr. Goyal while inaugurating ‘Corporate Governance Summit-cum-Excellence Awards,’ organised by The Associated Chambers of Commerce and Industry of India (Assocham), in New Delhi on Friday.

“To my mind, ethical practices and good governance can possibly add as much to the Indian economy as GST could,” said Mr. Goyal.

“The impact of good governance, corporate governance can be felt when one looks at the top Sensex stocks and you find that good, reputed companies are given a premium for good practices,” he added.

Financial stress

Talking about the discoms’ financial stress, the Union Minister said, “We are in active dialogue with discoms, we have a broad framework under which I am very confident, three or four discoms which are really under stress will have a roadmap and in the next three years you will see a sea change in discom story of India.”

On being asked if the government was looking at extending financial restructuring plan (FRP) for the discoms, Mr. Goyal said, “FRP, which was introduced originally in April 2012 and implemented in October 2013 had actually not really changed the situation on the ground, it failed to bring about any significant improvement in AT&C (aggregate technical and commercial losses, in the financial losses of the companies.”

“We are working on a more holistic approach where the companies, the discoms themselves will be encouraged to bring about the change, the turnaround through good corporate governance practices and we will hand-hold them and ensure that within a defined timeframe we turn these around,” he added. The Union Power Minister also said that he was looking at National Thermal Power Corporation (NTPC) Ltd., which won the Assocham Corporate Governance Award in the PSU (listed company) category, as the world’s most valuable energy company four years from now.

“I am going to hold to NTPC to this when I am continuously telling them you have to be the world’s most valuable power company in the next four years.”

In his address at the summit, Rana Kapoor, President, Assocham, said, “With the advent of dynamic regulatory landscapes, an increasingly complex global business environment and rapid technology disruptions, it is critical for organisations to identify and assess key governance and compliance risks.”

“While Corporate Governance regulations in India are amongst the best globally, striking the right balance between growth and sustainability and following corporate governance practices in spirit, will significantly improve ‘Ease-of-doing-Business’ and galvanise investments into the country,” said Mr.Kapoor.

“Assocham is fully committed to working with the Government and regulators towards enhancing transparency and increasing accountability to promote innovation and competitiveness nationally, thereby making India the most preferred investment destination globally,” added Mr. Kapoor.

Source: TH


#16, #2015, #august