TRAFFIC COSTING- HISTORY OF TRAFFIC COSTING IN RAILWAYS

HISTORY OF TRAFFIC COSTING IN RAILWAYS

The Traffic Costing as a study was started in 1962 at the instance of World Bank and formed part of Statistics Dept in Indian Railways.

Present Traffic Costing system was started w e f 01.04.1979 along with the Revised Classification (activity based cost)( Indian Railway Finance Code Part II)

Unit cost is the end result

Unit cost = total expenditure (source: Capital & Revenue accounts – Book of Statistics) divided by Total performance (arrived from Statistical Statements of Statistical Dept)

Reliability:

Traffic Costing analysis will be reliable

1. subject to booking of correct expenditure appropriate detailed and sub detailed heads of relevant abstracts
2. if the Combined Train Reports are not correctly collected and compiled by statistical dept correct performance cannot be ascertained eg Net Tone Kilo Meter NTKM, Vehicle Kilo Meter VKM, Engine Kilo Meter EKM, ww TKM

Expenditure:

Demand Nos 1 & 2 total expenditure of I R as a full apportioned to all railways based on their activities proportionately

Demand no 3 – over heads

Demand no 4 to 10 4, 5, 6& 7 repairs and maintenance

                   8, 9 & 10 operating expenses

Demand no 11, 12 & 13 over head

1. C & R prepared gauge wise, demand wise, abstract wise and sub detailed head wise
2. statement 15 prepared by statistical dept and gauge wise expenditure bifurcated between coaching and goods on the basis of total GTKM earned ( prepared by Statistical Dept)
3. Proforma 5 is a statement prepared by T C cell to bifurcate the cost of suburban expenditure from that of total coaching expenditure

Present Costing:

1. Unit cost of goods services computed by Zone and compiled by Railway Board at all India average.
2. Coaching services computed class wise for passenger service and parcel, luggage, postal and catering services.
3. Railway Board computes commodity costing for 29 selected commodities that constitute 94 % of originating tonnage and 95 % of such earnings.  Standard train costing is done based on the unit cost not compiled.
4. Specific train costing is carried out based on actual survey.

Uses:

1. financial appraisal of various projects
2. granting special rates
3. costing of special trains both freight and passenger services

Desirable objectives:

 - knowing the cost of various elements for effective cost control facilitates improving productivity of services.

Hurdles:

1. The zonal railway is taken as a unit. Hence, field unit cost cannot be ascertained as inefficient field units get merged with efficient field units. No appreciation for good performance and no punitive action for wasteful expenditure
2. Hassan Iqbal committee suggested Activity Based unit Costing at field unit level. However, it is not done. So, atleast divisional level study to be done since accounting system provides for that exercise
3. For ascertaining the Fully distributed costs, no proper guidelines for formulation of rates for different commodities or different class of passengers travel. These are highly variable and keep revised
4. The Gross Tonne Kilo Meter for all statistical purpose seems irregular
5. The cost of van and shunting goods trains still done though obsolete – to be dispensed with
6. There is no longer marshalling done in Indian Railways.
7. Similarly, there is no longer smalls and repacking in Indian Railways

Suggestions:

1. The filed unit study or divisional level is to be done.
2. The budgeting reforms- segregate fixed and variable costs – provide fully for fixed and for variables by determining the anticipated cost of performance and multiplying the same with the anticipated performance units – divide zone into various responsibility centers down to grass root level in divisions and workshops each responsibility centre to be given a unique code
3. The short term variable cost – less than five years long term – five to ten years  11 years period prescribed for productivity tests
4. The social service obligations

                     a. passenger and other coaching services

               b. essential commodities carried below cost

                     c. operation of uneconomic branch lines

                     d. new lines opened for traffic during the last 15 years

5 The Specific Fuel Consumption needs review – after five years or so when specialfuel efficient locos are introduced

6. The Line haul cost at various speeds to be done by Engineering Analysis and not by accounting or statistical method

7. The GTKMs based on standard rake composition duly updating it for additions and deletions on a monthly basis

8. The Train costing is to be reviewed – enroute collection by TTE unreserved earnings etc to be taken into account

9. The Costs at Rajdhani is excess 10 % more for I AC, 2 AC ACCC is compared to Mail/Express trains.