WORKSHOP COSTING IN SOUTHERN RAILWAY
INTRODUCTION:
The
role of Cost Accountants in Indian Railways has gained phenomenal prominence
over the years. There has been emphasis for Costing analysis and control of
activities by maintaining Cost records from early days. The process of change
from mere cost accounting to aiding the Management in crucial decision making
has been narrated stage-wise in this article. This article is intended to high
light the ever-increasing role and potential of CMAs in Cost and Management
Account practices.
SOME RAILWAY TERMINOLOGIES FOR
QUICK REFERENCE:
RS: ROLLING STOCK
POH: PERIODICAL OVERHAUL
LOC: LABOUR ON COST
MOC: MATERIAL ON COST
DEMU: DIESEL ELECTRICAL MULTIPLE UNIT
RSP: ROLLING STOCK PROGRAMME
M&P: MACHINERY AND PLANT
URC: UNIT REPAIR COST
IMMS: INTEGRATED
MATERIAL MANAGEMENT SYSTEM
AIMS: ACCOUNTING INFORMATION MANAGEMENT
SYSTEM
PER: PERAMBUR
KRCL: KONKAN RAILWAY CORPORATION LTD.
INCEPTION OF COSTING:
Until 1996, the scope of
Costing in Indian Railways was restricted to production units and production
activities carried out in workshops. Most workshops in Railways, engaged in carrying
out Rolling stock maintenance activities, were manufacturing spares used for
POH. Table 1 explains below, the
year-wise implementation of various types of costing in Workshop Accounts of
Railways.
Table 1: Year-wise implementation of Costing in
Indian Railways until 1992
|
COSTING SYSTEM |
YEAR |
PURPOSE |
|
Job Costing |
1962 |
Production activities in the workshop |
|
Batch Costing |
1965 |
Wagon production at Golden rock workshop |
|
Process Costing |
1992 |
Costing of Foundry & Sawmill shop activities- Now dispensed
with consequent to closure of shops. |
SCOPE OF THE ARTICLE
The
core activity of Railways is transportation. However, the scope of this article
covers the Cost and Management practices practiced in Workshops, the domain I
am familiar with for the past two decades. To keep the Rolling Stock track
worthy, day to day maintenance at running sheds, Intermediate Overhaul at
Depots (Open line) and Periodical Overhaul (POH) at Workshops are being carried
out at stipulated intervals.
SYSTEM OF COSTING FOR ROLLING STOCK MAINTENANCE IN INDIAN RAILWAYS
Figure 1: Costing system for arriving at
URC of Coaches and Wagons
Figure 2: Costing system for arriving at URC of
AC Locos
Table 2: Extension of Costing to Repair
Activities
|
COSTING SYSTEM |
YEAR |
PURPOSE |
|
Revised Costing System |
1996-97 |
Contemplated by RITES
for Electric Loco wise costing in Fox pro |
|
Uniform Costing |
2010-11 |
Developed “in-house”
software application in Oracle
D-2k |
|
DEMU Costing |
2013-14 |
DEMU wise costing for
POH/ special repairs in Oracle D-2k software application forms. |
|
Coachwise Costing |
2017-18 |
Coach wise type wise
costing for POH and other repairs in Oracle - similar module. |
REVISED COSTING SYSTEM:
This system of costing
contemplated by RITES in Fox Pro was used for arriving at the POH cost incurred
per loco. This has been implemented in respect of Electric Loco at Loco Workshop/PER
and Diesel Loco at Golden rock workshop. This is the first system introduced to
arrive at unit repair cost in respect of major repair activity whereas the rest
of the systems were only for ascertaining production cost. The salient features
are:
The cost incurred is
divided into three categories viz. Group ‘A’, Group ‘B’ & Group ’C’:
- Group’ A’ cost is usually the scheduled
repair to be attended to in respect of all locos and hence the total cost
incurred under this group is averaged among the locos turned out during
that month
- Each sub-activity is identified as a cost
center and the cost will be collected cost center wise.
- Group ‘B’ cost is the cost incurred on each
loco based on the condition of the individual loco.
- Additional expenditure on account of
re-cabling and modifications carried out are collected and accounted under
different cost centers.
- Group ‘C’ cost reflects the high-value
items replaced in respect of individual loco turned out during the month.
- All expenditure booked cost center wise are
apportioned to the locos turned out during the month based on standard Pre
Determined ratio (based on equated output).
- The
greatest advantage of this system is that the material cost is related to
consumption per Loco.
- The Inter Railway POH bills for Electric
Locos are generated based on this RCS system.
- This enables comparison of the unit
activity cost of Electric locos repaired every month.
- For comparison purpose, Group ‘A’ cost
alone is taken as standard POH cost
However, this was not
linked to financial Accounts and could not be continued in the outdated
software.
UNIFORM COSTING SYSTEM:
The shortcomings noticed
in the Revised Costing System were addressed and on the similar lines Uniform
Costing System, a software application was developed in Oracle and D-2k forms
“In-House” and implemented from June 2010 for POH of Electric Locomotives done
at Perambur Locomotive Workshops. In this system, averaging Group A cost among
all Locos turned out during the month has been dispensed with and specific
consumption of materials to each Loco is billed. This system is linked to
Financial Accounts.
EVOLUTION OF DEMU WISE COSTING:
Workshops in Railways
are more keen on achieving their targeted outturn than the cost associated with
it. A study on POH of one rake of DEMU owned by KRCL -(Diesel Power Car & 3
Trailer Coaches) was done. Outcome of the study revealed more than 50% under absorption
of cost based on the average Costing system. This Financial implication was explained
to the staff concerned at Loco workshop/PER and immediately costing on
real-time basis was agreed to be implemented for DEMU activity. Workshop
Accounts/PER Computer section developed an in-house software application for
DEMU wise costing in Oracle and D-2k forms and is fully operational from
2013-14.
COACH
WISE COSTING SYSTEM
Similar module for Coach
Wise Costing at Loco Workshop/PER has been implemented from January 2018. All
diversified activities of Loco Workshop/PER have been brought under the network
of Costing system.
BENEFITS OF ROLLING STOCK WISE COSTING (POH REPAIR ACTIVITY)
● Controls Overcharging of Revenue Head to reflect
realistic Operating Ratio.
● Eliminates undercharging other railways ensure
effective clearance of WMS (Workshop Manufacture Suspense) balance.
● Meaningful comparison of inter Railway cost of
POH (URC).
● Actual consumption of material and labour
booking for each coach is billed.
● Modification works undertaken during the course
of POH- booked to respective RSP or other relevant Head.
● Arrive at cost of Coach POH type wise
● Stores and labour data can be imported to this
module from IMMS/AIMS.
● Each section is considered as a cost center for
the collection of expenditure.
PERIODICAL SPECIAL STUDIES
The following studies
were made and reported in the last few years:
● The Rolling Stock of Railways viz. Coaches;
Wagons and Locomotives are due for POH at Scheduled period of 18 months, 54
months and 72 months respectively. POH given before the prescribed due dates
are termed as premature POH.
● The impact of premature POH of wagons and other
Rolling stock were studied and reported to Mechanical Department. This has now
resulted in drastic reduction in the arising of premature POH.
● A detailed report on under-utilization of
High-Value Machines was submitted highlighting the probable loss to railways.
This data will be useful for planning M&P procurement in ensuing years.
● An outsourcing proposal to rebuild Wagons was
averted. The surplus manpower availability executing the work in the workshop
was proved and has resulted in enormous savings to Railways.
● Benefits on the introduction of new group
incentive scheme by replacing the old scheme introduced in 1962 highlighted
probable recurring savings and benefits to the organization.
● Life Cycle Cost of few high-value machines was
worked out and submitted to Board at Board’s instance under thematic study.
● Individual study on Manpower requirement Vs
availability for each activity/ shop done at various stages.
● A detailed study was conducted on wide variation
in URC of common POH activities among various workshops of Southern Railway.
● This lead to some standardization of man-hours
for scheduled POH in 3 Mechanical workshops of Southern Railway.
● Coordinated for bringing out revised Code
(Operational guidelines) for Mechanical Department.
Of
late, fresh outsourcing proposals are also routed through CMA to assess the
exact manpower requirement Vs availability in pre and Post outsourcing periods.
The above studies imply the switchover of the role of Cost Accountant
in Railways from mere Cost accounting to Management Accounting in line with the
change of name of our Institute.
The role of CMA in
Railways is to highlight and guide the top Management to take right decisions
at right time on the following issues.
● Identify the areas requiring better utilization
of available resources.
● Whether to continue “in-house” or outsource old
or new activities.
● If outsourcing is preferred, what quantum and
when to outsource.
● Alternate use of spare available resources.
● Identify areas of avoidable expenditure and
monitor their non recurrence.
● Ensure correct allocation and apportionment of
expenditure to various activities.
● Suggest ways and means in pruning down overhead expenditure
● Assess the actual cost of each activity carried
out.
● Aid in effective inventory control to avoid
locking up of funds.
● Suggestions to augment railway earnings from
traffic and other avenues.
● Assist in implementation of ERP in future.
CONCLUSION:
Every one will appreciate
that Indian Railways is a huge Capital Intensive Organisation
involving large amounts of Operational Outlay. The need for achieving Excellence in Managing
Costs in such an Organisation will be apparent.
The Scope for Contribution by Cost Management Professionals here is
immense in areas like Capacity Planning, Resoure allocation and utilisation, Investment Decisions, Measurement of Operational efficiency,
Outsourcing decisions, Waste elimination, Cost Conscious Shop Floor Practices,
Cost control iniatives etc.,
Smt Aruna Mohan B Com FICWA
Former Cost Accountant at
O/o FA&CAO/S&W/PER SRLY
