Thursday, May 31, 2012

ACCOUNTS SUBJECTS II FOR APO

PARLIAMENTARY AND MANAGEMENT'S CONTROL OF RAILWAY FINANCES

(Chapter III of "Admn. and Finance - an introduction" and Chapter IV and V of Finance Code)

1.1 Indian Railways being a major departmental undertaking of the Govt, their functions and Finances are watched, monitored and controlled by Parliament. The Finances and performance of Railways as a Commercial enterprise are controlled by Railway Management.

1.2 PARLIAMENTARY CONTROL

The control of parliament over Railway finance is exercised as follows :-

i) Voting the Railway Budget and review of the Budget through Appropriation Accounts under various Articles of constitution of India.

h) Review of the policy and finances of Railway by Parliamentary Committees viz- Estimates Committee, Public Account Committee and Railway Convention Committee.

1.3 PARLIAMENTARY FINANCIAL COMMITTEES

Even though Parliament discusses the Demands for Grants for sufficiently long period before voting, due to magnitude and complexity of State activities, it is almost impossible for Parliament as a body to scrutinize the myriad of expenditure proposals and Govt. activities effectively and minutely. In order to help it exercise effective control over Public expenditure, Loksabha has set up three financial Committees viz. Public Accounts Committee, Estimates Committee and Committee on Public Undertaking. Railway Convention Committee an ad-hoc Committee functions like a Finance: Committee.

1.3.1 ESTIMATE COMMITTEE

The function of this committee is to report on the economies. improvements in organization, efficiency o or administrative reform that may be effected consistent with the policy underlying the estimates. The committee can suggest alternative policies in order to bring about efficiency .and economy in administration . the committee also examines whether the money is well laid out within the limits of the policy implied in the estimates.



The committee may also examine matters of special interest that may come to light in the course of its work though unconnected with the estimates. The committee continues the examination of the estimates throughout the Financial year and may report to the house as its examination proceeds or on the conclusion of the examination.

1.3.2 PUBLIC ACCOUNTS COMMITTEE

The Public Accounts Committee examines the accounts showing the appropriation of sums granted by the Parliament for the expenditure of Govt. of India, the annual finance account of the Govt. and such other accounts as the Committee may think fit. The Committee also examines the revenue receipts of the Govt. If any money has been spent by the Govt on any service in excess of the amount granted by Parliament for that purpose, the Committee examines with reference to facts of each case the circumstances leading to such an excess and presents a report thereon to the Parliament.

The functions of PAC extend "beyond the formality of expenditure to its wisdom, faithfulness and economy".

The attention of the PAC is mainly devoted to its examination and consideration of Appropriation Accounts and Audit Reports thereon of the Comptroller and Auditor General of India. The Committee also examines and enquires into various irregularities which have become public even though no formal audit has been presented on the subject.

1.3.3 RAILWAY CONVENTION COMMITTEE

The R.C.C. is an ad-hoc Committee constituted to review the rate of dividend which is payable by the Railways to the General Revenues as well as other ancillary matters in connection with Railways finance 'vis-a-vis' general finance and make recommendations thereon.

While the Committee of 1949, 1954, 1960 and 1965 confined themselves only to the question of determining the rate of dividend payable by Railways during the succeeding quinquinnium the RCC 1971for the first time selected some subjects for detailed examination and presented reports to Parliament covering not only the question of dividend but also diverse subjects pertaining to Railway's working. The Committee of 1973,1977 and 1980 followed suit.

1.3.4 FOLLOW-UP OF COMMITTEE REPORTS

Parliamentary procedure in Lok Sabha envisages an elaborate system of follow up of the recommendations made in the report of the ' Financial Committees. After presentation of the reports, copies are forwarded to ministries for taking action on the recommendations made therein.

Budget Exercises:

The expenditure to be incurred for the ensuing year is envisaged as early as in Nov the previous year based on the actual expenditure up to that period and approximate projection for the ensuing year. Finally this estimate becomes the basis for Demands for Grants to be voted in the parliament. While advising the zonal railways, the railway board specifies a spending limit to be adhered to by each zonal railway. Based on the budget orders, the proportionate requirement is distributed to twelve months and cash authorization is advised for each month. The cash authorization is cross checked with the actual cash expenditure at the end of the month to enforce budgetary discipline on units which have incurred expenditure beyond the authorization.

Fiscal Review Exercises:

Review exercises are basically aimed at informing the railway board about the expenditure vis-à-vis earnings to be submitted to the parliament which originally sanctioned the demands for grants. The first is the august review which takes in to account the actual for the April, May, June and the approximate for July to review the financial situation. The second being the financial review in December. The third is the final modification in January and the fourth is the violent modification in February. Thus the review exercises also contribute greatly to control the expenditure

Account Currents:

In railways, the approximate and actual accounts current are prepared for the purpose of “ways and means” to enable the finance ministry to monitor excess / savings over the granted budget allotment. The approximate account current separately for revenue and capital are submitted in the first week of the subsequent month and the actual account current is submitted in the third week of the subsequent month. This account current contributes greatly to control the expenditure.




PERFORMANCE BUDGETTING

15.1 The performance budgeting came into effect in Railways in 1979-80 and has been gradually Stabilizing for purposes of management control over the costs in relation to (he physical activity. Before discussing the merits and advantages of P.B., it is necessary to have an understanding the form of budget, which was in existence prior to the introduction of Performance Budgeting. . ' . '. ^

In one of its reports the World Bank Study team has described Budget as prepared in the Past as a "routine and dogged exercise, undertaken produced by a bureaucratic elite". The form in which the Railway Budget was presented to Parliament till 1979-80 provided for appropriation of funds for certain items of expenditure falling under each demand without correlating expenditure to the quantum of service to be rendered with the aid of the funds sanctioned. For all practical purposes, the Budget was a portrayal or record of cash transactions and their anticipations; it did not at all serve as a tool for management or as a device for evaluating performance.

The Conventional Budget was more 'appropriation oriented' than 'Performance oriented'. There were in all 22 demands for grants not strictly representing functional groups or activities though for grants' are supposed to basically represent the estimated expenditure in a 'Single or homogenous group of functions. The other defects in the old system of budgeting were:-

-,.. 111. .

i) The Accounts heads under the detailed heads of accounts did not, correlate with the Budget heads. The expenditure under demands had to be collected from different revenue abstracts.

ii) Budget had little relevance to performance.

iii) When Parliament sanctioned the budget, it was not aware of the quantum of services that would be rendered in the various aspects of Railway activities

15.2 Based on the recommendations of a Task Force appointed for the purpose, the demands for grants have been restructured with the approval of the Estimates Committee. It was therefore considered necessary that the budget as a document must be capable of fulfilling the following objectives:-

i) to present more clearly the purpose and objectives which funds are sought and to bring out the programmes and accomplishment in financial terms.

to help in the better understanding and review of the budget.

Hi) to improve the formulation of the-budget and to aid the process of decision making sit all levels of Go 't. and

iv) to incorporate an element of accountability,

15.3 Performance budgeting, therefore, implies fixing in advance performance targets under each activity, in acceptable and feasible measures of output, fixing corresponding finance outlay for achieving these physical outputs and monitoring and comparing the actual performance both in physical and financial terms.

The steps involved in Performance Budgeting are identification of functions, programmes and activities. In order to achieve the objectives of P.B. the demands for grants have been restructured to spell out the functions, activities and objects. Each demand has 3 sub¬divisions. .

H Sub Heads of Demands representing major functions.

ii) Detailed Heads, representing further break-up of the activity classification i.e. identifying 'Why' the expenditure is incurred

iii) Primary Units identifying 'what' the expenditure denotes, (objects of expenditure, i.e. salary, allowances, material etc

An example of concordance between the Sub-Heads of Demands for Grants and Main Heads of Accounting Classification is given below


STEPS IN BUDGET:

1. PREPARATION,

2. VOTING,
3. EXECUTION,
4.REVIEW

1&3 ARE EXECUTIVE FUNCTION
2&4 ARE PARLIAMENTARY FUNCTION

FEBRUARY

PRESENTATION OF BUDGET

DEMANDS FOR GRANTS REVENUE BUDGET – ADMINISTRATION, REPAIRS & MAINTENANCE OF RS, P&E, OPERATING ,FUEL

NEW MINOR WORKS

MARCH

Final modification

BUDGET GRANT – BUDGET ORDER, PROPORTIONATE BUDGET ALLOTMENT ,SPENDING LIMIT, CASH REQUIREMENT,CASH AUTHORIZATION – CASH BUDGETING , ROLE OF LIABILITY REGISTERS

WORKS, REVENUE ALLOCATION REGISTERS

DIFFERENCE BETWEEN TRADITIONAL AND ZBB

Traditional                              No                                        ZBB

Function oriented                         1                              Project oriented

Justification for new works Only  2   All including on going to be justified

Critical view as cost increase        3   Existing level of expenditure

Input oriented                              4    Output oriented

Dogged exercise in board meetings 5   Grass root activity

Bureaucratic exercise                    6    Lay man oriented

No cost / profit centers                 7    Profit/cost centers



ROLE OF PLAN HEADS:

For the purpose of link with the accounts of the Central Government the Plant heads will form the Minor Heads of Railway Capital under the Major Heads "546-Capital Outlay on Indian Railways-Commercial lines" and "546-Capital Outlay on Indian Railways-Strategic lines." The minor Heads classification are as follows:"

PLAN HEADS
11. New Lines (Construction). 42. Workshops including Production Units

12. Purchase of new lines. 51. Staff Quarters.

13. Restoration of dismantled lines. 52. Amenities for staff.

14. Gauge conversion.

53. (i) Passenger Amenities.

(ii) Other Railway User Amenities.

15. Doubling. 61. Investment in Government Commercial under Takings-Road services.

16. Traffic facilities-Yard remodeling and others. 62. Investment in Government Commercial under¬ taking-Public Undertaking

21. Rolling Stock. 64. Other specified works.

29 Road Safety work

30 Road Safety work

31. Track renewals. 71. Stores suspense

32. Bridge work. 72. Manufacturing suspense.

33. Signalling and Telecommunication works. 73. Miscellaneous Advances.

34. Taking over of line wires from P. & T. Dept. 81. Metropolitan Transport Projects.

35. Electrification projects.

36. Other Electrical works.

41. Machinery and Plant.

The sub and detailed heads give the break up of the expenditure on assets in its details such as Preliminary Expenses, Land, Formation, Permanent Way, Bridges, Stations and Buildings etc. In the classification given in the following pages the details of sub-heads and detailed heads which have been given for the minor heads 1100-new lines will be adopted for the other minor heads Depending upon the nature of the asset being created or replaced to the extent indicated against the respective head.

For example, when track renewals are undertaken the allocation of expenditure will be given as 3141 or 3142 for renewal of rails and fastenings or sleepers and fastening as the case may be. To these 4 digits will, however, be added the code for primary unit of expenditure viz., wages or materials etc. to complete the allocation e. g., 3141-04 will indicate the pay and allowances of departmental establishment engaged on renewals of rails and fastenings. The cost of Permanent Way materials etc. directly supplied for this work will be allocated to 3141-04 and so on.

If a work of construction of workshop alone is undertaken the workshop buildings will be represented by 4263 and the workshop equipment by 4274 (assuming the equipment is for Mechanical Department). The primary unit (or object) code will be added as the last 2 digits according to the object of expenditure.

8.1.1 ROLE OF PUS:

Primary units are object of expenditure. They indicate the object of expenditure like PU – 01 = Pay, 02= DA etc. The role of Pus is very important for budget preparation. Generally Pus 01 to 18 are known as Establishment Pus meaning that the expenditure on these Pus cannot be postponed. From PUs 19 to 99 and non establishment PUs

ZERO BASED BUDGET
DECISION UNITS


Decision units should be located where a particular activity /operation can have meaningful identification and evaluation. The identification of the decision units should be carried by the information requirement of higher-level managers. It should be ensured that the basic decision units selected are not of such a low level in the organization structure as to result in enormous paper work and review. On the other hand the decision unit should not be so high as to prevent easy access and discussion for a meaningful review of the work being performed



Decision units – on divisions, each dept may constitute a decision unit. In workshop and production units, the shops dealing with distinct activities like carriage repair, wagon repair, and electrical repair or planning cell etc may be decision units. It is left to the local administrators to have a further split up if necessary. In zonal railway head quarters officers each dept should be regarded as the decision unit. Other administrative offices like railway service commission, staff colleges, railway rates tribunal, RDSO, etc would each constitute a decision unit but may be sub-divided if necessary.



DECISION PACKAGE

A decision package is a budget request, which should contain the following:

a description of the function or activity of the decision unit

the goals and objectives of the various functions/ activities of the unit

benefits to be derived from financing the activity/ programme

Relevance of the activity/programme to the over all objectives of the organizations/dept in the present context.

consequent of its non-funding

the projected / estimated cost of the package

the yearly phasing of the proposed expenditure / project cost



Alternative ways of performing the same activity or achieving

Decision packages should ordinarily be prepared respect of every activity for which budget is prepared A decision package is a budget request, which should contain the following:

a description of the function or activity of the decision unit

the goals and objectives of the various functions/ activities of the unit

benefits to be derived from financing the activity/ programme

Relevance of the activity/programme to the over all objectives of the organizations/dept in the present context.

consequent of its non-funding

the projected / estimated cost of the package

the yearly phasing of the proposed expenditure / project cost

Alternative ways of performing the same activity or achieving in the existing classification. In the case of Plan schemes, each scheme costing over Rs Crore

At present, a budget figure is worked out for each subhead of demand in the revenue classification. In the ZBB sense, it is to be known as a decision package when taken together with certain information associated with the figure. Conventionally, the figure for a subhead would be built up for a whole division from past actual, the trend, and known factors for variation. In ZBB the attempt should be to work out the requirements in each Responsibility Centre performing the activity in question, and then consolidate for the division and for the railways as a whole.

The need for ranking in operation and maintenance activities arises from the fact hat different levels of funding can be contemplated for various activities like ballasting, maintenance of roads and buildings, special ticket checking, publicity, etc which admit of some discretion in the level of performance, and priorities have to be determined. It commences with each Responsibility centres, taking together all activities and the different levels that can be thought of and leads to priorities within the department at divisional level. Consolidation at this stage and against at the zonal headquarters stage should bring out priorities through ranking so as to adjust spending to the eventual allotment, covering areas of importance and ensuring maximum benefits.

ZBB identifies “dead wood” the wasteful expenditure areas –suggests alternative uses of items

Is technique which link the existing planning, budgeting and review process

Allowed for budget reduction or expansion or reallocation

Helps as a tool to the decision maker

Is to achieve cost benefit through cost effectiveness analysis

Give always priorities of objectives


Steps involved in ZBB

define objectives viz budgeting exercise to achieve reduction in staff over heads- analyse and drop down projects – restructure organization itself

strategy of implementation

developing decision units

completion of decision packages

ranking of all packages – new projects are always to given low priority

implementation – just to accept the projects that have cost benefit analysis

works above Rs 1 Crore – decision units

workshop carriage repair activity -


The End

ACCCOUNTS SUBJECTS- I FOR APO EXAMS

ACCOUNTS DEPT AND ITS ROLE IN THE INDIAN RAILWAYS




IR CONSISTS EXECUTIVE DEPT AND SERVICE DEPT

EXECUTIVE BRANCHES

• OPERATING/COMMERCIAL

• CIVIL ENGINEERING

• MECHANICAL ENGINEERING

• ELECTRICAL ENGINEERING

• SIGNAL & TELECOMMUNICATION ENGINEERING

SERVICE BRANCHES

• STORES

• PERSONNEL

• ACCOUNTS

• MEDICAL

• SECURITY

ANALYTICAL

STATISTICS



RAILWAY Vs CENTRAL FINANCE



TILL 1924, RAILWAY FINANCE WAS PART OF CENTRAL FINANCE.

SEPARATED ON THE RECOMMENDATION OF ACWORTH COMMITTEE

SINCE THEN RLY BUDGET PREPARED SEPARATELY

PRESENTED TO PARLIAMENT AHEAD OF CENTRAL BUDGET



CENTRAL GOVT IS

OWNER OF THE RAILWAYS.

SOLE SHAREHOLDER OF INDIAN RAILWAYS

GETS DIVIDEND ANNUALLY FOR INVESTMENT.

DIVIDEND RATE FIXED BY RCC

(RAILWAY CONVENTION COMMITTE)





STURCUTRE OF GOVT FINANCE

CONSOLIDATED FUND OF INDIA (MAJOR RESERVOIR)

2. CONTINGENCY FUND OF INDIA. (EMERGENCY RESERVE)

3. PUBLIC ACCOUNTS OF INDIA.

(DEPOSITS FROM PUBLIC)



CONSOLIDATED FUND OF INDIA

ALL RAILWAY EARNINGS GO INTO CONSOLIDATED FUND OF INDIA.

ALL EXPENDITURES ARE MET FROM CONSOLIDATED FUND OF INDIA.

PARLIAMENT TO SANCTION GRANTS.

PRESIDENT TO SANCTION APPROPRIATIONS.

CONTINGENCY FUND OF INDIA

SERVES AS AN EMERGENCY RESERVE.

AVAILABLE AT THE DISPOSAL OF PRESIDENT OF INDIA.

RAILWAY PORTION OPERATED BY FC.

AMOUNT TAKEN TO BE REPLENISHED AT ONCE.



STRUCTURE OF RAILWAY ACCOUNTING

GOVERNMENT ACCOUNTING (FINANCE ACCOUNTS)

2. COMMERCIAL ACCOUNTING (CAPITAL AND REVENUE ACCOUNTS)

BOTH LINKED BY OPERATING SUSPENSE ACCOUNTS.



RAILWAY EARNINGS

CLASSIFIED INTO THREE

1. COACHING / ABSTRACT X

EARNINGS FROM PASSENGER TRAIN.

2. GOODS / ABSTRACT Y

EARNINGS FROM GOODS TRAIN.

3. SUNDRIES / ABSTRACT Z.

EARNINGS FROM OTHER SOURCES

COACHING EARNINGS

A) PASSENGER EARNINGS –

ASSESSED CLASS-WISE

PASSENGER KILO METER

(PKM) AS FACTOR

B) OTHER COACHING EARNINGS –

- BASED ON PREVIOUS YEAR ACTUALS.

GOODS EARNINGS

ASSESSED COMMODITY WISE.

NTKM USED AS FACTOR.

SUNDRIES

LICENCE FEE, ADVT.FEE, RENT ETC.,

PREVIOUS ACTUALS FORM BASIS.

EXPENDITURE

CLASSIFIED INTO

16 DEMANDS FOR GRANTS

REVENUE EXPENDITURE 1 TO 15.

CAPITAL EXPENDITURE 16.

PREPARATION

 PREPARED AT GRASS-ROOT LEVEL i.e. DIVISIONS/EXTRA DIVISIONS.

 COMPILED BY ASSOCIATE ACCOUNTS.

 CONSOLIDATED AT BOARD’S LEVEL.

VOTE OF PARLIAMENT

BUDGET ESTIMATE (BE) TO BE VOTED BY PARLIAMENT. (VOTED)

CERTAIN EXCEPTED ITEMS SANCTIONED BY PRESIDENT. (CHARGED)

VOTED EXPENDITURE – CHARGED EXPENDITURE.

BOTH FROM CONSOLIDATED FUND OF INDIA.

APPROPRIATION ACT

BUDGET VOTED BY PARLIAMENT, APPROPRIATION BILL PASSED.

SPENDING AUTHORITIES AUTHORISED TO WITHDRAW FROM CONSOLIDATED FUND OF INDIA.

BUDGET ALLOTMENT ADVISED TO ZONES BY RAILWAY BOARD.

VOTED PORTION KNOWN AS GRANT.
CHARGED PORTION AS APPROPRIATION.
BOTH KNOWN AS BUDGET ALLOTMENTS


ADVISED TO ZONES THROUGH BUDGET ORDER.

EXPENDITURE CONTROL

BUDGET ALLOTMENT

SPENDING LIMIT

INTERNAL SPENDING LIMIT

PROPORTIONATE BUDGET ALLOTMENT

EXCHEQUER CONTROL

ACCOUNTS

• Plays the role of internal auditor – arithmetic, procedure, appropriation, delegation
• Plays the role accountant for IR
• Prepares budget
• Finance vetting of estimates, proposals, etc
• Finance member in surveys, tenders and condemnation committees

CANNONS OF FINANCIAL PROPRIETY
STORES CODE CHAPTER I
131. Standards of Financial Propriety: - In exercising these powers, the Controller of� Stores should pay strict regard to the standards of financial propriety among which are the following:-
(i) The expenditure should not prima facie be more than the occasion demands, and that government servant should exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money.
(ii) No authority should exercise its powers of sanctioning expenditure to pass an order, which will be directly or indirectly to its own advantage.
(iii) Public money should not be utilized for the benefit of a particular person or section of community, unless
(a) the amount or expenditure involved is insignificant
or
(b) a claim for the amount could be enforced in a court of law or
© the expenditure is in pursuance of a recognized policy or custom.
(iv) The amount of allowances, such as travelling allowances granted to meet expenditure a particular type should be so regulated that the allowances are not on the whole source of profit to the recipients.

Note: - � All proposals-involving financial implications except those which have been specifically exempt for this purpose should be referred to finance branch for advice before these are sanctioned.



REVISED CLASSIFCATION – FINANCE CODE II (ALLOCATION)

 WORLD BANK STUDY: In a view to streamline the budget process, a study made by the world bank suggested the revision of accounts classification. The prime object is to gauge the railway expenditure activity wise and object wise

 ADMINISTRATIVE REFORMS COMMITTEE: The Administrative Reforms Committee set up a task force to study the existing classification and offer meaningful classification as advised by the world bank.

 W E F .1.04.1979 ONWARDS

CLASSIFICATON OF EXPENDITURE

DEMANDS FOR GRANTS FOR EXPENDITURE ON RAILWAYS AND THE NATURE OF EXPENDITURE COVERED BY EACH
The proposal of Government in respect of sums required to meet the expenditure proposed to be met from the "Consolidated Fund of India" are submitted in the form of "Demands for Grant" to the Parliament. The Demand shall be for gross expenditure the credits and recoveries being shown in the form of footnotes to Demands. The Demands are divided into sub-heads and detailed heads -

The demands for grants represent basically the estimated expenditure proposed to be concurred in a 'Single” and homogenous group of functions broken up further into detailed activities.

At present there are 16 demands for Grants for expenditure of the Central Government on Railways These are detailed below. The nature of expenditure booked against them is shown against each.

DEMAND NO, 1 - RAILWAY BOARD:-
This demand is for expenditure on Railway Board. The credits under this represent recoveries from the Ministry of works and Housing (CPWD) for expenditure on the maintenance of Rail Bhavan, which is arranged by the Railway Ministry in agreement with the Ministry of works and housing.

DEMAND NO. 2 - MISCELLANEOUS EXPENDITURE (GENERAL)
This demand includes
a The cost of surveys or preliminary investigation to examine the feasibility and prospects of new line construction and other projects:

b) Expenditure on the Research Designs and Standards Organization, which is attached to, but not part of Railway Ministry.

c) Expenditure on miscellaneous special establishments dealing with problems affecting the working of the Railways as a whole but not part of the Ministry like the Railway Inspectorate, Central Bureau of investigations railway liaison offices etc.,. Credits under this is head refer to the recoveries from CBI for the Railway staff seconded to the CBI.

d) Expenditure on Statutory Audit. The charged amounts represent the cost of the railway Wing of the office of the Comptroller and Audit General of India,

e) Expenditure regulated by contracts on -

i) The share of net earnings payable to owners of branch lines worked by, and as part of the Indian Govt. Rly. system,

ii) Subsidy and rebate to such branch lines to make up their total earnings to specified minimum;

iii) Subsidy payable to lines owned and worked by certain private companies when their net earnings do not give the guaranteed return on their capital,

f) Expenditure on Misc, charges like the Railways contribution to the experimental research stations at Khadakvasala, Subscriptions to the International Railway Congress Association enrolment of Indian Railways as an associate member of the International Union of Railways, on hospitality and entertainment expenses in connection with the visits of foreign dignitaries etc.

DEMAND NO. 3 GENERAL SUPERINTENDENCE AND SERVICE

This demand is for expenditure on the Zonal Head quarters and Divisional Office of Railway Administrations- For the Accounts, Personnel and Stores Departments, this demand includes the expenses at the Divisional, Workshop and Depot level also.

The credits or recoveries under this Demand relate to commission charges recovered from the Defence Department for audit of warrants and credit notes connected with military traffic and the cost of staff recovered from non-Railway Departments for work done on their behalf for service rendered to them.

DEMAND NO. 4 - REPAIRS AND MAINTENANCE OF PERMANENT WAY AND WORKS

This Demand is for expenditure on Repairs and Maintenance of the P-Way assets like track, other buildings and structures, Repairs and Maintenance of railway colonies , staff quarters and welfare buildings are included under Demand No, 11,

The credits under this demand are for materials released from works charged to Revenue and share of credits for freight on Railway materials including coal.

DEMAND NO. 5 - REPAIRS AND MAINTENANCE OF MOTIVE POWER
This Demand is for expenditure on repairs and maintenance of motive power.
The credits under this Demand arc mainly for materials released from works charged to revenue and share of credits for freights charges on Railway material, including coal.

DEMAND NO. 6 REPAIRS AND MAINTENANCE OF CARRIAGES AND WAGONS
This demand is for expenditure on repairs and maintenance of carriages and wagon including Electric Multiple Unit Coaches-

The credits under this Demand are mainly for materials released from works charged to revenue and share, of credits for freight charges on Railway materials including coal.

DEMAND NO 7 - REPAIRS AND MAINTENANCE OF PLANT AND EQUIPMENT
This demand is for expenditure on repairs and maintenance of all plant and equipment by the Civil, Mechanical, Electrical and signals and telecommunications, engineering departments,

The credits under this Demand are mainly for materials released from works charged to revenue and share of credits for freight charges on Railway materials.

DEMAND NO. 8 - OPERATION EXPENSES - ROLLING STOCK AND EQUIPMENTS

This demand is for expenditure on the operating expenses of mechanical, electrical, signalling and telecommunications equipment including Rolling Stock.

The credits under this Demand are for share of credits for freight on Railway materials including coal,

DEMAND NO. 9 - OPERATING EXPENSES - TRAFFIC

This demand is for expenditure on Traffic operating and Traffic Commercial Departments (excluding claims organization) This demand also includes Lease Charges of IRFC-

The credits under this Demand are for share of credits for freight on Railway materials including coal credit of unconnected coal wagons which used to be accounted for as earnings prior to 1972-73 are also included under this demand,

DEMAND N0.10 - OPERATING EXPENSES - FUEL

This demand is for expenditure on coal and other fuel for loco purposes, freight and handling charges, including fuelling of engines, sales lax, excise duty and cess on coal and electric current for traction purposes.

The credits under this Demand are for the value of cinders and coal ash sold, credits for electric energy supplied to outsiders and share of credits for freight charges on Railway materials, including coal. The credits for freight charges on coal in this and other demands offset the increase in Gross Budget in this Demand on account of freight.

DEMAND N0.11 - STAFF WELFARE AMENITIES

This demand is for expenditure on educational and medical facilities, health and welfare services, canteens and other stall amenities, repairs to staff quarters, residential and welfare buildings.

The credits under this demand relate to school fees collected, grants-in-aid to Railway schools received from State Governments,

DEMAND NO. 12 - MISCELLANEOUS WORKING EXPENSES

This demand is for miscellaneous working expenses like security, compensation claims for goods lost or damaged as also under workmen's compensation Act, catering expenditure on Hospitality and entertainment and the suspense heads which do not form part of other functional demands.

Credits or recoveries under this Demand relate mainly to credits adjusted under suspense heads-

DEMAND NO. 13 - PROVIDENT FUND, PENSION AND OTHER RETIREMENT BENEFITS

This is a composite Demand for all retirement benefits like Government Contribution to P-F, Special contribution to PP and payment of Pensionary charges to Railway staff covered by the retirement benefits. The various pension and other retirement benefits to pensionable employees are met out of Pension Fund and contributions to P.F. and payment of gratuities and special contribution, in respect of non-pensionable employees are met out of revenue.

Credits or recoveries represent service contribution from other Departments/Ministries in respect of staff on deputation. This gross demand includes recoupment from the public account to the consolidated fund of India of the sums voted initially by Parliament from out of the consolidated fund of India for meeting the expenditure chargeable to Pension Fund.

DEMAND NO, 14 - APPROPRIATION TO FUNDS

This demand is for appropriation from Revenue to the various Railway funds as under:-

a) Appropriation to DRF (As per RCC recommendations)

b) “ to pension fund (As per RCC recommendation)

c) " to Development fund (Out of revenue excess after Payment of dividend) ...

d) " to Capital Fund (Keeping in view the Plan requirement for building up infrastructure out of internal resources)

DEMAND NO. 15 Dividend to General Revenues, Repayment of loan taken from General Revenues and Amortization of over capitalization. This demand is for payment lo General Revenue and contribution for grants to Slates in line of passenger fare lax,

DEMAND NO, 16 ASSETS ACQUISITION - CONSTRUCTION AND REPLACEMENT

This demand is for expenditure on Assets-Acquisition, construction and replacement, whether met out of loans to he obtained from the General Exchequer on internal resources of the Railway viz. Revenue, the DRF, the DF and the Capital Fund. No re appropriation of funds will be permissible between Capital, Railway Fund and Revenue, credits or recoveries represents adjustment in the accounts as reduction of expenditure, but are outside the scope of the gross demand. The gross demand, includes recoupment from the public account to the consolidated fund of India of the sums voted initially by Parliament from out of the Consolidated Fund of India, for meeting the expenditure chargeable for the DRF, DF and Capital Fund

The charged expenditure under all the demands (except demand no, 14 and 15) is for payment in satisfaction of court decrees and arbitration award where made into rule of the court.



ITEMS OF EXPENDITURE BOOKED TO DEMAND NO. 2 MISCELLANEOUS EXPENDITURE

1) Surveys.

2) RDSO (Research, Designs & Standards Organization),

3) Cost of Railway Statutory Audit. . .

4) Payment of worked lines. Subsidized Companies

5) Miscellaneous Establishment;

I- Railway Recruitment Boards (RRBs)

2. Centralized Training Colleges.-

(Staff College, Vadodara, Pune, Jamalpur, Nasik, Secunderabad etc

3. Commissioner of Rly Safety, Railway Rates, Tribunal, Railway Claims Tribunal, Railway Transport Museum, Rail Fare and Freight Commission.

6) Miscellaneous Charges- such as

i) Contribution to research station at Khadakvasla

ii) Membership fee to the 'International Union of Railways

iii) Publicity for Tourism Promotion in India and abroad. Hospitality and Entertainment expenses in connection with visits of foreign Dignitaries,

iv) Children Train in some Parks

v) Grant-in-Aid lo Indian Rly. Welfare Organization,

vi) Grant-in-Aid in CRIS,

vii) Payment to RITES for the studies undertaken for Railways on various subjects (study on costing of repairs in Workshop, Preparation of Manual for General Power Supply, Installation, etc.)

Payment to Consultants for undertaking Study of Bombay Suburban System


SALIENT FEATURES OF THE REVISED CLASSIFICATION:

1. Demands 1 and 2 are the nature of General On cost as formulated by the Study Team 1970 of the Administrative Reforms Committee. These expenses are common to all railways.

2. Demand No 3 common to each railway as the management and office establishment are charged to this demand.

3. Demand Nos. 4,5,6 and 7 are the nature of maintenance cost otherwise known as common cost in the Traffic Costing of the Railways.

4. Demand Nos. 8,9 and 10 are the nature of direct ( cost ) expenses.

5. Demand No 11 pertains to Staff Welfare as suggested by the Estimates Committee 1955 in their 31st Report.

6. Demand No 12 incorporates all the expenses that do not fit into the above functional demands.

7. Demand No. 13 pertains to all Retirement Benefits as the concept has been enunciated by the Study Team on Reforms in the Structure of Budget and Accounts 1970.

8. Demand No 14 and 15 pertains to all Appropriation to Funds and Dividend.

9. Demand No 16 pertains to acquisition to capital accounts.


CLASSIFICATION OF EARNINGS

ABSTRACT DETAILS REMARKS

X Coaching earnings consisting passenger, luggage, parcels,
Y Goods earnings
Z Sundry other earnings

Classification of capital sources
APLPHA NUMERIC SUBJECT

P 20 CAPITAL

Q 21 DRF

R 22 OLW- R

S DF I (P) -23

S  DF II (L) - 33

S  DF III (U) - 43

S  DF IV (S) - 53

T 26 RSF

U 27 SRSF





Wednesday, May 2, 2012

NEW ASSIGNMENT AT ZRTI/TPJ

Dear Friends

Thank you very much for making use of the blogsite and sending me feed back. Whenever you login please try to register your identity so that I can send messages. 

As of now on promotion to Senior Scale, I am promote and transferred as Sr AFA/Zonal Railway Training Institute Trichy.  I am joining on the 7th May at the institute. 

I need you continued cooperation and support so that many more posts on  the Railway accounts subjects can be posted and power point presentations can be uploaded.

Please remember me and my spouse and daughter in your prayers. Your prayers, wishes and love have sustained me through the calm and storm.


Thank you once  again


wish you all for greater strides


D Xavier Gnanaraj
3rd May 2012

Monday, April 23, 2012

GAUGE CONVERSION


FINANCIAL JUSTIFICATION
DINDIGUL – POLLACHI – PALGHAT
AND
POLLACHI – COIMBATORE
FOR GAUGE CONVERSION

Introduction:
The project line runs as a single MG line from Dindigul upto Pollachi. From there, it splits into Coimbatore and Palakkad sides. The jurisdiction over the area is by the Madurai Division. The beneficiary districts are Dindigul and Coimbatore of TN state and Palakkad District of Kerala State.
Need:
The existing MG section is a passenger oriented section. The present MG network links the north Kerala and the business/industrial towns of Coimbatore, Salem, Erode and other towns in the south Tamil Nadu. The project section will be a shorter and faster route. Due to non-availability of through BG network, through passengers from north Malabar area are to be transshipped at Palghat, Coimbatore and Dindigul.
On conversion it would provide a direct rail link from south Tamil Nadu to west coast, Goa , Mumbai, Gujarat via KRCL.
Side by side the existing MG line would continue to cater to the needs of the local area.
Length of the project:
The project section of Dindigul-Pollachi-Palghat is for a distance of 224.88 KMs. (Dindigul-Pollachi = 121.20 KMs + Pollachi- Coimbatore = 45.81 KMs + Pollachi-Palghat -Palghat = 57.87 KMs) Railway Board ordered for a survey in the year 1997 and report was submitted in the year 2000.
Gauge:
The proposed line is BG
Permanent Way:
52 KG Class I rail on PSC sleepers with M+7 density on Ballast cushion of 250 mm 
Signaling:
The signaling arrangements will be Standard III MACL Panel Interlocking and mode of traction is Diesel.
Curvature:
The existing degree of curvature in the MG shall be adopted.
Bridges:
There are 195 LCs (155 + 40) proposed.
Earnings:
Coachng:                                     1555.236 Lakhs
Coaching working expenses       1907.037 Lakhs
Net earnings                                (-) 351.801 Lakhs
Operational savings                    3375.367 Lakhs
Investment on Rolling Stock      6135.550 Lakhs
Civil engineering                        29763.105 Lakhs        
Signal and Telecommunication  3859.260 Lakhs
Electrical (General)                    1767.000 Lakhs

Capital cost of construction is  35389.365 Lakhs +  6135.550 Lakhs Rolling Stock
Credit for released material  6345.450 Lakhs
The internal rate of return works out to 6.788 %

Alternative 1: Earnings arising out of additional accommodation on BG system plus earning on account of introduction of new express train between Madurai and Mangalore and operational savings between MG and BG systems for both coaching and freight traffic at IRR of 9.21 %
Alternative 2: Crediting only the operational savings between MG and BG systems for both coaching and freight traffic at IRR of 10.037 %
Revised construction cost  229.842 Crores
The period of construction envisaged was 7 years
The internal rate of return for the Madurai-Dindigul-Pollachi-Coimbatore worked out to 16.261% for an estimated cost of   304.803 Crores.
Another financial appraisal for part conversion of Madurai-Dindigul MG line alone into BG was prepared with an IRR of 20.718 % on an estimated cost of construction of  96.14 Crores
Consideration:
  1. Pilgrimage traffic: The famous Lord Murugam temple is located atop the Palani hills.
  2. The hitherto neglected peace-meal consignments can be brought to rail roads as the ever increasing prices of fuel oils such as diesel and petrol, the road traffic is likely to lose heavy traffic.
  3. The coir manufacturing industries in the sections, soya extraction units, cotton mills and other agriculture oriented industrial units are likely to be benefited as the inconvenience of transshipment is to be eliminated.
  4. inward traffic includes cement, coal-Lieco, soya, fertilizers, iron and steel, food grains, cotton etc are already benefiting by the MG
  5. Outward traffic coconut, soya products, coconut products, coir and coir products, tea and coffee, textile yarns from Pollachi to Northern destinations have been projected by the chamber of commerce and industries.
  6. Important inward freight traffic to the project is the Food Grain Traffic from the delta regions of Thanjavur District to Pollachi region.
Accounts observation:
“The project is NOT financially viable at the IRR of (+) 6.788 %. However, the project section would become isolated MG section since the MG section between Dindigul and Madurai section being converted as BG (doubling) and also at PGT and CBE end terminated with BG. Hence to avail the benefit of contiguous section and availability of alternate route the project is considered”

NEW BG LINE PROJECT


FINANCIAL JUSTIFICATION
NIDAMANGALAM – PATTUKOTTAI via MANNARGUID
FOR A NEW BG LINE

Introduction:
Nidamangalam is an existing intermediate (IMS) station on the Thanjavur – Thiruvarur section. Patttukkotai is also an existing IMS on the Thiruvarur – Tiruthuraipundi – Karaikudi section. Both the stations are under the jurisdiction of Thiruchchirappalli Divison.

Need:
There has been popular demand for connecting Mannargudi to the existing Nidamangalam and Pattukkottai. In fact a MG branch line existed between Nidamangalam and Mannargudi till 1975. due to popular demand and members from Parliament and the state legislature, ministry of railways has sanctioned  New Survey during 2007-08.
Proposed stations:
Rajappayyanchavadi, Haridranadi, Mannargudi, Serangulam, Paravakkottai and Madukkur.  The road distance is 48 KMs and the rail distance is 54.30 KMs.  There are four crossing stations and two halt stations.

Gauge:
It is proposed to be a BG line
Permanent Way:
52 KG Class I rail on PSC sleepers with M+7 density on Ballast cushion of 250 mm  for the mainline and 52 KG Class II rail on PSC sleepers with M+4 density on Ballast cushion of 200 mm  for loop and other lines.
Signaling:
The signaling arrangements will be Standard II MACL Panel Interlocking and mode of traction is Diesel.
Curvature:
The maximum degree of curvature will be 4 °. All curves are transitioned for the Maximum Permissible Speed of 100 KMPH. The proposed ruling gradient is 1 in 200 © duly compensated.
Bridges:
There are seven major 103 minor bridges. There are four ROBs and 35 RUBs and no level crossings are proposed.
Earnings:
Passenger earnings per year are estimated at  41.210 Lakhs and  55.074 Lakhs for local and interchanged passengers.
Freight:
Nidamangalm is an existing rail head generating paddy traffic for the TNCSC. Paddy, coconut, groundnut are grown in abundance for outward traffic and rice, grains, pulses, fertilizer, cement and wheat for inward traffic.  Further, M/s Pamani Fertilizer is the only industry in the area. The estimated annual outward and inward fright earnings are  2092.474 Lakhs and  4568.081 Lakhs. Net annual earnings anticipated are  2175.263
Investment on Rolling Stock  7944.700 Lakhs
Civil engineering                   23366.829 Lakhs             
Signal and Telecommunication  2325.246 Lakhs
Electrical (General)                  1459.890 Lakhs

The internal rate of return works out to 4.586 %

Consideration:
1.       Mannargudi is one of the important pilgrim centers of the ITDC, Lord Rajagopalaswany temple is located here. It is also known as Dhakshina Dwaraka, Mannai or Raja Mannargudi.
2.       socio- economic uplifting of the people can be achieved due to the changed scenario. Trade and industry of the area also has developed.

PROJECT APPRAISAL

with due acknowledgement to Shri Nagarajan Sr SO/CN/MAS

Project Appraisal

1)      Introduction:

i)        Project appraisals are highly necessary at the present financial position of IR where resources are becoming scarce and demand from various sections of the society are more.

ii)      Any commercial undertaking will attempt project evaluation methods to budget their capital expenditure for the following:
(a)    Expansion of operation
(b)   Diversification of operations
(c)    Replacement/Renewals
(d)   Research and Development

2)      Need for project appraisal:

i)        Involvement of large sums of money
ii)      Involvement of greater amount of risk on account of unforeseen situations
iii)    Irreversibility once investment Decision is made
iv)    Appraisals facilitate the identification of relatively superior proposals.

3)      Project report:

i)        Project report not only projects financial data related to outflows and inflows but also a meticulous traffic survey exercise for a New line, GC and Doubling/Augmentation of line capacity works to enhance the rly working
ii)      Traffic potential, existing and anticipated
iii)    Traffic Density present and future volumes
iv)    Technical feasibility
v)      Financial viability

4)      Definition

i)        Detailed study of traffic conditions of an area
ii)      Assessment of Traffic prospects
iii)    Financial implication

5)      Objective of Traffic survey

i)        Estimate of total traffic likely to be generated in the foreseeable future with special reference to the catchments area
ii)      Inter-0model allocation of total streams of Traffic between rail and other modes of Transport
iii)    Computation of earnings and working expenses for each year of the economic life of the project which is taken as 30 years
iv)    Appraisal based on annual cash flows and application of Discounted cash flow method (DCF)
v)      Minimum yield of rate of return of 10%



6)      Filed work

i)        Fixing of most suitable alignment for the proposed rail line in close collaboration with Engineering team
ii)      Collection of data from various sources like local bodies, prominent citizens, business community, Transport authorities, Industrialists, chamber of commerce of the alignment region and catchment areas.

7)      Data to be collected

i)        No. of bus trips (from Transport sector), plying on the alignment and its catchment area, occupancy, running time, fare structure and other road vehicles
ii)      Bus traffic during festival days and national Holidays
iii)    Assessment of passenger preference for Rail mode
iv)    Tourism and tourist prospects
v)      Local area profile from Panchayat/Municipal bodies
vi)    Educational institutions, banking and hospital facilities
vii)  Agricultural/mineral resources generated from the alignment section
viii)            Existing industrial scenario and anticipated development of industries on the alignment and catchment area
ix)    Plans for economic development of the area by the local/central Govt.            

8)      Estimate of passenger traffic & earnings

i)        Diversion from road to rail mode based on existing trends and pattern
ii)      Propensity of the traveling public for rail mode due to competitive rail fare
iii)    Travel time, comfort and safety
iv)    Travel pattern based on importance of places of travel
v)      Travel pattern based on importance of places of travel
vi)    Earnings at current rail tariff level

9)      Estimate of freight traffic and earnings

i)        Existing goods traffic pattern both inwards and outwards on the alignment region
ii)      Requirement of specific commodities for specific needs
iii)    Trading & commercial centers on the alignment
iv)    Industries on the alignment
v)      Incremental traffic from existing rail goods shed due to increasing trend in traffic volumes over years
vi)    Addl. new goods traffic for existing/coming up industries
vii)  Addl. Traffic  in foreseeable future as diversion from existing road net work
viii)            Mineral wealth and additional traffic from mines if any
ix)    Port development, if any, on the alignment region
x)      Rail transport clearance from Railway Board
xi)    Earnings estimated from origination to destination point of movement of goods tfc. Using latest freight tariff



10)  Passenger traffic Working expenses

i)        Based on the traffic assessed running of passenger/express trains are determined for rake composition, trips
ii)      A check list is prepared to arrive at facets like train km, vehicle km, vehicle days and gross tonne km
iii)    Based on the checklist and applying the various cost elements from unit cost, working expenses is worked out.  General OH charges, central charges are added to the working as a percentage.  The total working expenses is further escalated to the present level by applying escalation factor given by the Board

11)  Assessment of goods traffic working expenses

i)        Terminal services cost
(a)    Cost of documentation and cost of other terminal expenses per wagon (in terms of units)
(b)   Cost of marshalling per wagon per yard handled (in terms of units
(c)    Cost of provision and maintenance of carrying units per wagon day(based on wagon turn round)
ii)      Line haul services cost
(a)    Cost of traction per 1000GTKM (depending on traction)
(b)   Cost of other transportation services including cost for train passing staff per 1000 GTKM
(c)    Cost of provision and maintenance of track & signaling per 1000GTKM
iii)    After computing total working expenses, general OH and central charges as a % of cost is added
iv)    78.5% of operations and maintenance and cost over existing rail system is also added to the project working expenses
v)      The total cost of working expenses is escalated to the current level of survey with escalation factor furnished by the board.

12)  Estimate of net earnings

i)        Gross working expenses arrived both for coaching and goods traffic assessed is deducted from gross earning to compute net earnings

13)  Assessment of Rolling stock and investment

i)        Requirement of rolling stock like coaches, VPUs and locos for running the proposed passenger/express trains is assessed utilizing train km., trips/rakes,

ii)      Rly. Bd. Statistical elements pertaining to Zonal Rly is made use of.  The current cost of rolling stock from Pink Book (Rolling stock Programme) is used for working out investment.
iii)    Requirement of Rolling stock like wagons and locos for running the proposed goods tfc. is assessed utilizing net tonne km., train km., Engine km., and engine usage.  Railway Board statistical elements pertaining to Zonal Rly is made use of the current cost of rolling stock from Pink Book (Rolling stock programme) is used for working out investment.


14)  Savings

i)        On GC Surveys, in addition to addl. tfc. Assessed, savings in the different operational & maintenance cost between MG & BG systems is to be reckoned
ii)      Savings due to avoidance of transshipment cost on GC works also computed
iii)    Savings in operations cost due to shorter lead of the project section, if any will also be credited duly debiting the loss in earnings if any
iv)    Savings on engine hours and wagon hours due to elimination of detention enroute on single line section is also reckoned while working out financial appraisals for Dlg/Augmentation surveys.

15)  Engineering estimate

i)        Engineering estimate includes civil, signal telecommunication and electrical (g) , OHE cost, wherever proposed is also debited.
ii)      Credit on released railway material is credited wherever applicable

16)  Terminal value of assets

i)        The life of any rail project is reckoned as 30 years for financial appraisal purpose.  The value of physical assets of different categories outliving the project life of 30 years is also computed and credited at appropriate years.  Replacement cost for the assets which expires before the life of the project is debited at appropriate years.

17)  Financial appraisal

i)        Fin. Appraisal on Rly. Projects are undertaken using the DCF method
ii)      This method is more scientific since it takes into account the real time value of money
iii)    It also takes into a/c realistic earnings, cash expenditure and accurable savings
iv)    IRR is done under DCF technique which gives max. ROR possible from a project a given cash flow wherein the rate of discount is located by interpolation for bringing NPV (Net present value) = Zero


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