COST OF REPAIRS IN RAILWAY WORKSHOP UNIT: VARIATION IN COST
Introduction: In railways, costing as a management device to assess as well as to control costs is of very recent phenomenon. Nowadays, costing has become very central to the concept of management. Costing is being applied to the railway workshops in order to achieve the unit cost of various phases of workshop activity. Primarily the cost of POH is to be identified in order to improve the efficiency and productivity of the railway workshops.
COST ACCOUNTING AND ITS SALIENT FEATURES: Cost accounting serves the following functions:
1) Identify unit of cost-of product, department or service
2) Arrive at the net result – cost, profit or loss- for each item of operation, production or service.
3) Help valuation of stocks and work-in-process by each type, category and component.
4) Help construction of budget and budgetary control.
5) Develop control systems through analysis and exceptions.
6) Present and interpret data for management planning, decision-making and control.
7) Suggest criteria for choice among alternatives of investment, output, products and markets.
INHERENT DIFFERENCE: The present day nine zonal railways are created out of the previous company railways. Hence, the differences persist even today in the unit cost of various phases of workshop activity. Obviously in the cost of repairs to rolling stock also the variation persist despite best efforts taken. Therefore, the historical realities should be taken into consideration for identifying the unit cost variation.
RAILWAYS AND COSTING: The days of transport monopoly enjoyed by the railways are over. So is the unstained support the railways received from the General revenue. The railways have been asked to generate their own internal funds to meet the various projects besides, the regular maintenance work. Generate.
THE GROUND REALITIES: At present the repair cost obtained is on average basis only. No scientific system of costing being adopted for cost collection and cost control purposes. According to the existing system, the expenditure relating to each repair activity is accumulated from April to March the previous year and the same is divided by the total number of units turned out for the same period.
There seem to be wide variation in the unit repair cost of various railways or for similar activity. As said earlier the repair costs are only the average cost which gives/provides no room for any comparison between unit costs of various railways. There is no standard or estimate prevalent for making the variance analysis to find the reason for high cost or otherwise.
The Railway Board has sometimes-ago fixed standard man-hours for POH activities without giving the details of material requirement etc. The man-hour content is more or less the same in the different workshop. The unit cost of labour may/different due to/be:
1) Variation in Labour Mix.
2) Variation in the Labour cost (HRA, CCA etc)
3) Variation in the efficiency of the Workshops.
4) The total number of operation carried out in repair activities – P O H.
VARIATION IN LABOUR MIX: The workshop labour is categorized into unskilled, semiskilled, skilled I, II and III, mistry, charge man, foreman, Deputy Shop Superintendent, Shop Superintendent Etc. Such variety is existing in all the railway workshops. However, the same number of labour may not be used in all workshops for a job. Naturally, such difference would show wide fluctuations in the unit cost.
VARIATION IN THE LABOUR COST: In the cost analysis study made by the Railway Staff College, in 1990, it was found that the P O H costs for Wagons on Eastern Railway, Northern Railway, North East Frontier Railway, South Central Railway and Western Railway have been more or less same for the period from 1984 to 1988. However, the study found that the cost is the highest in Southern Railway followed by North Eastern Railway. Similarly, the cost is high in Central and South Eastern Railways.
VARIATION IN THE EFFICIENCY OF THE WORKSHOPS: The present day Railway workshops are handed down to the various zonal railways from the erstwhile company railways. Hence the efficiency of the technology and machinery in these shops vary and the resultant cost variation. The efforts to streamline the efficiency of the railway workshops have culminated in the formation of COFMOW – Central Organization for Modernization of Workshops. However, the historical reasons for the difference in the unit cost will persist until the modernization reaches the farthest corner of the workshops.
OTHER VARIATION FACTORS: The workshop infrastructure facilities, the environment, availability of tools etc, will also cause the variation in the unit cost.
REASONS FOR THE VARIATION IN MATERIAL: The reasons for difference in material cost is due to the following reasons,
1) Policy of the Stores/Material Management
2) Proximity to the market or source of supply.
3) Distance and the transport cost.
4) Storage facilities.
SUGGESTIONS:
1) Introduction of Job or Batch costing system in the workshops will improve the cost control measures.
2) Fixing a proper standard, preferably by the Railway Board in respect of materials to be supplied and man-hours to be utilized for each repair activity.
3) Cost Centres/ Profits Centre approach may be introduced for repair activities for better cost control purposes.
4) Introduction of Zero Based Budgeting and estimating the cost of repair will improve the Inter-Railway comparison of costs.
5) Latest and effective tools and sophisticated machinery may be provided to all workshops.
CONCLUSION: In the days to come, due to economic liberalization and privatization, the railways’ cost responsibility has increased manifold. The dwindling support from the General Revenue may altogether stop at a time. Hence, it is high time; the railways have evolved a scientific costing system to watch as well as to control the costs. Such reduction in the working expenditure will improve the adverse Operating Ratio. The over all efficiency will be toned up due to constant watch on the costs. The corporate objective of reduction in the tariff cost can be achieved with the cost control. Finally, the efficient and cheaper transport would contribute to the welfare of the people of India and the Country.
Introduction: In railways, costing as a management device to assess as well as to control costs is of very recent phenomenon. Nowadays, costing has become very central to the concept of management. Costing is being applied to the railway workshops in order to achieve the unit cost of various phases of workshop activity. Primarily the cost of POH is to be identified in order to improve the efficiency and productivity of the railway workshops.
COST ACCOUNTING AND ITS SALIENT FEATURES: Cost accounting serves the following functions:
1) Identify unit of cost-of product, department or service
2) Arrive at the net result – cost, profit or loss- for each item of operation, production or service.
3) Help valuation of stocks and work-in-process by each type, category and component.
4) Help construction of budget and budgetary control.
5) Develop control systems through analysis and exceptions.
6) Present and interpret data for management planning, decision-making and control.
7) Suggest criteria for choice among alternatives of investment, output, products and markets.
INHERENT DIFFERENCE: The present day nine zonal railways are created out of the previous company railways. Hence, the differences persist even today in the unit cost of various phases of workshop activity. Obviously in the cost of repairs to rolling stock also the variation persist despite best efforts taken. Therefore, the historical realities should be taken into consideration for identifying the unit cost variation.
RAILWAYS AND COSTING: The days of transport monopoly enjoyed by the railways are over. So is the unstained support the railways received from the General revenue. The railways have been asked to generate their own internal funds to meet the various projects besides, the regular maintenance work. Generate.
THE GROUND REALITIES: At present the repair cost obtained is on average basis only. No scientific system of costing being adopted for cost collection and cost control purposes. According to the existing system, the expenditure relating to each repair activity is accumulated from April to March the previous year and the same is divided by the total number of units turned out for the same period.
There seem to be wide variation in the unit repair cost of various railways or for similar activity. As said earlier the repair costs are only the average cost which gives/provides no room for any comparison between unit costs of various railways. There is no standard or estimate prevalent for making the variance analysis to find the reason for high cost or otherwise.
The Railway Board has sometimes-ago fixed standard man-hours for POH activities without giving the details of material requirement etc. The man-hour content is more or less the same in the different workshop. The unit cost of labour may/different due to/be:
1) Variation in Labour Mix.
2) Variation in the Labour cost (HRA, CCA etc)
3) Variation in the efficiency of the Workshops.
4) The total number of operation carried out in repair activities – P O H.
VARIATION IN LABOUR MIX: The workshop labour is categorized into unskilled, semiskilled, skilled I, II and III, mistry, charge man, foreman, Deputy Shop Superintendent, Shop Superintendent Etc. Such variety is existing in all the railway workshops. However, the same number of labour may not be used in all workshops for a job. Naturally, such difference would show wide fluctuations in the unit cost.
VARIATION IN THE LABOUR COST: In the cost analysis study made by the Railway Staff College, in 1990, it was found that the P O H costs for Wagons on Eastern Railway, Northern Railway, North East Frontier Railway, South Central Railway and Western Railway have been more or less same for the period from 1984 to 1988. However, the study found that the cost is the highest in Southern Railway followed by North Eastern Railway. Similarly, the cost is high in Central and South Eastern Railways.
VARIATION IN THE EFFICIENCY OF THE WORKSHOPS: The present day Railway workshops are handed down to the various zonal railways from the erstwhile company railways. Hence the efficiency of the technology and machinery in these shops vary and the resultant cost variation. The efforts to streamline the efficiency of the railway workshops have culminated in the formation of COFMOW – Central Organization for Modernization of Workshops. However, the historical reasons for the difference in the unit cost will persist until the modernization reaches the farthest corner of the workshops.
OTHER VARIATION FACTORS: The workshop infrastructure facilities, the environment, availability of tools etc, will also cause the variation in the unit cost.
REASONS FOR THE VARIATION IN MATERIAL: The reasons for difference in material cost is due to the following reasons,
1) Policy of the Stores/Material Management
2) Proximity to the market or source of supply.
3) Distance and the transport cost.
4) Storage facilities.
SUGGESTIONS:
1) Introduction of Job or Batch costing system in the workshops will improve the cost control measures.
2) Fixing a proper standard, preferably by the Railway Board in respect of materials to be supplied and man-hours to be utilized for each repair activity.
3) Cost Centres/ Profits Centre approach may be introduced for repair activities for better cost control purposes.
4) Introduction of Zero Based Budgeting and estimating the cost of repair will improve the Inter-Railway comparison of costs.
5) Latest and effective tools and sophisticated machinery may be provided to all workshops.
CONCLUSION: In the days to come, due to economic liberalization and privatization, the railways’ cost responsibility has increased manifold. The dwindling support from the General Revenue may altogether stop at a time. Hence, it is high time; the railways have evolved a scientific costing system to watch as well as to control the costs. Such reduction in the working expenditure will improve the adverse Operating Ratio. The over all efficiency will be toned up due to constant watch on the costs. The corporate objective of reduction in the tariff cost can be achieved with the cost control. Finally, the efficient and cheaper transport would contribute to the welfare of the people of India and the Country.
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