BUDGET AND BUDGETARY CONTROL

01. Budget:
v A plan of future activities normally expressed in financial terms.

v Not a mere 'forecast', a ‘prediction’ or a ‘guesstimate’ or 'estimate.
v But a well-conceived plan which shows the desired level of profitability of the company as a whole.

v "A financial and/or quantitative statement prepared and approved prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objective" - by Institute of Cost and Works Accountants (UK).

v Briefly - "a predetermined statement of management policy during a given period which provides a standard for comparison with the results actually achieved".

02. Budgetary Control:
Definition -
"the establishment of departmental budgets relating to the responsibilities of executives to the requirements of a policy, and the continuous comparison of actuals with budgeted results either to secure by individual action or through executive direction, the objective of that policy or to provide a basis for its revision." - by The Institute of Cost and Works Accountants (UK).

The Budgetary control system involves -
v Establishment of targets.
v Comparison of actuals with the targets and
v Acting upon results to achieve maximum profitability.

Functions
v Making budget for future activities.
v Using budget to control activities.
v Briefly - it concerns with planning, organising and controlling all the financial and operating activities of the firm in the forthcoming period.
v De Paula illustrates Budgetary Control through an analogy with the navigation of a ship across the seas.
v Log book of Navigating officer - factors that caused misadventure - report by him to captain for correct course of ship.

03. Objectives:
v To plan the allocation of business resources, so as to achieve maximum profitability.
v To communicate plans and targets to executives responsible for their execution.
v To bring about co-ordination between the activities of technique business.
v To motivate executives to achieve targets.
v To provide a yard stick for comparison with targets.
v To show managements where action is needed to remedy a situation.
v To centralise control.
v To decentralise responsibility on to each executive involved.
v To combine the ideas and aspirations of all levels of management.
v To act as a guide and director during unforeseen contingencies.

04. Advantageous:
v Instrument of planning.
v Tool of co-ordination.
v Delegation of authority and responsibility
v Checking tool.
v Control of costs.
v Accounting records
v Controlling the Income and Expenditure

05. Limitations:
v Future is uncertain.
v Inflexible nature
v A costly system.
v Not a substitute for management - only a tool.
v Lot of paper work.
v Lack of co-ordination among departments - negative effect.
v Responsibilities may overlap.
v Resistance to change.

06. Reasons for failure:
v Too much of expectation.
v Poor organisation.
v Inadequate accounting system.
v Failure to obtain co-operation.
v Failure to analyse and ascertain causes of variances.
v Failure to revise the estimates i.e., lack of flexibility.

07. Organisation for budgetary control:
v Creation of budget centres:
v With a budget centre there may be smaller areas to which costs are attributable - called 'a cost centre'.
v 'Cost Centre' - " A location, person, or items of equipment or a group of these, in or connected with an undertaking in relation to which costs may be easily and conveniently ascertained and used for purposes of cost control"

v Good accounting system.
v Better knowledge about the system.
v Organisation chart.
v Establishment of a Budget Committee.
v Preparation of Budget manual
v Budget period.
v Determination of the 'key factor' or limitation factor.
v Laying down 'level of activity'.

08. Budget procedure:
THE BUDGET PROCEDURE
ESTABLISH OBJECTIVES
BUDGET AND PLANS PREPARED BY BUDGET CENTRES
CORDINATED BY BUDGET COMMIITTEE
ACTUAL PERFORMANCE RECORDED
FINAL BUDGETS AGREED
COMPARISONS MADE
FEED BACK FOR FUTURE CONTROL
VARIANCES INVESTIGATED
REMEDIAL ACTION WHERE POSSIBLE

09. Classification of Budget:
v Fixed Budget and flexible budget.
v Fixed budget - “a budget which is designed to remain unchanged irrespective of the level of activity actually attained".
v Flexible budget - “is a budget which is designed to amend the budget figures as the level of output changes".

10. Various Railway Budgets:
v Railway Budget.
v Zero-based budgeting
v Performance budgeting.
v Earnings budget.
v Integrated budget.
v Fuel budget.
v Stores Budget
v Budget of manufacture operations.
v Works, Machinery and Rolling Stock Budget.
v Cash budget.

TOOLS & TECHNIQUES

TOPIC - 1

MANAGEMENT ACCOUNTING

MANAGEMENT REPORTS AND CONTROLS

01. Concept of Management Accounting:
v The techniques termed as 'Management Accounting' first in 1950 by British Team of Accountants (Anglo American Productivity Council).
v Internal administrative aid to business management. A Management tool.
v Two Terms - (1) Management (2) Accounting.
v Management is the substitute of ‘Guess Work' or 'Hit or Miss' method. Objectives - to study the operating problems on the basis of facts and to work out the best use and application of human and material resources.
v 'Accounting' - analysing, interpreting the transactions in terms of time, quantity and money. Financial - cost - Management Accounting.
v Definition of 'Management Accounting' - "The presentation of accounting information in such a way as to assist the management in the creation of the policy and day-to-day operation of an undertaking" - by: Anglo American Productivity Council.

v Objectives:
v Devices employed to achieve the objectives.
Forward looking principle.
Target setting principle.
The principle of exception.
02. Evolution:
v I Stage - Financial recording - Double entry system of Book-Keeping.
v II Stage - Scientific cost ascertainment - Cost Accounting.
v III Stage - Integration of cost and financial Accounts.
v IV Stage - Business forecasting, Budgeting and standard costing.
v V Stage - Budgetary control - not merely knowing the cost of production
but also controlling the costs.
03. Scope of Management Accounting:
v Financial Accounting.
v Cost Accounting.
v Budgetary and forecasting.
v Cost control procedure.
v Statistical methods.
v Legal provisions.
v Organisation and Methods.
04. Functions of Management Accounting:
v Modification of data.
v Analysis and interpretation of data.
v Facilitating Management Control.
v Formulation of Business budgets.
v Use of Qualitative information.
v Satisfaction of information needs of Management.
05. Emphasis of Management Accounting:
v Emphasis on future/use of budget.
v Involve a process selecting and discrimination of data - use of 'costs' in decision making process.
v Emphasis on the behaviour of cost elements - division of costs into - fixed, semi-fixed, variable and semi-variable.
v Establishes relationship between cause and effect of any significant business activity.
06. Advantages:
v Elimination of intuitive management.
v Enables to get maximum return.
v Continuous method of comparing results with standards, etc.

07. Stages:

Re-arrangement
®
Adoption
®
Analysis
®





¯
Mental Revolution
¬
Explanation
¬
Diagnosis
¬


v
Re-arrangement
:
Classifying the financial data etc.
v
Adoption
:
Processing of financial data
v
Analysis
:
Interpreting the financial statement.
v
Diagnosis
:
The causes and the effects i.e., result of the financial statement.
v
Explanation
:
Suggestion i.e., the result of analysis and diagnosis.
v
Mental Revolution
:
The concept of human psychology regarding the introduction of Management Accounting.

08. Tools and Techniques of Management Accounting.

v Management of today is not satisfied with only post-mortem examination of accounts and records; it seeks guidance from accounts in its management functions. It is not an easy job to arrive at any concrete management decision unless it is accentuated on some aids or medias. So certain medias or tools are necessary to reach the target.

v Therefore, Management Accounting employs tools and techniques in order to discharge its duty of helping the management in planning, co-ordination control and appraisal of activities. They are as follows:

v Analysis of financial Statements.

v Ratio Analysis.

v Cash Flow & Fund Flow Analysis.

v Statistical & Graphical Techniques.

v Costing Techniques.

v Standard Costing & Variance Analysis.

v Budgetary Control.

v Total Cost & Marginal Cost Analysis, Break-even and Profit Volume Analysis.

v Inventory Management.

v Financial Planning & Control.

v Evaluation of Capital Project & Returns on Investment.

v Communication & Reporting.

The above analysis may lead to two things viz.

i) Show areas where immediate management action is necessary.

(ii) Serve as the basis for formulation of regular plans for the future.

Ratio Analysis may throw up data for action in spheres or profitability, solvency of the business etc.

Flow of funds Analysis may disclose important features on the basis of which working capital requirements, stock holding, cash requirements cash position, etc, may be modified and revised.

Marginal Cost Analysis assists in policy decisions regarding utilisation of spare capacity, sales mix, cost control etc.

Data from the above analysis are used for establishing budgets and standard cost for future periods.

DEMANDS FOR GRANTS FOR EXPENDITURE ON RAILWAYS AND THE NATURE OF EXPENDITURE COVERED BY EACH

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 Orgainsation, 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 organisation) 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 duly 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 Amortisation 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.

FUNCTIONS OF DIVISIONAL ACCOUNTANT

FUNCTIONS OF D A are
1 as an accountant he should check arithmetical accuracy of all vouchers fully and compile the accounts of the divn in accordance with the prescribed rules and form the data supplied to him by the sub divns
2 As representative of A/c dept he should apply all the checks which is normally applied in the A/c office to the initial a/cs vouchers and other documents
3 As financial assistant, he should assist the executive in matters relating to a/c s , budget estimates and to the operation of financial rules generally
4 the relation between the DEN and D A is that of a Sub divisional officer and the DEN. The DEN is supposed to consult the DA in all matters involving a/cs,. Finance or budget. The DEN should see that the DA is given fullest opportunity of becoming conversant with all sanctions and orders, estimates and proposals.
The DA is considered as the head of the office establishment of the DEN. While checking accounts and returns whenever the DA finds any irregularity, he should bring to the notice of DEN. If DEN differs from the views of DA he records his orders and the same should be carried out. In such cases DA should maintain a register as DA’s Internal Check Register and enter the same with full details in the register and obtain the remarks of DEN therein. This register is put up to any visiting officer for information
The DA should not however, be made responsible for any cash transaction except emergent cases not exceeding four months.
The DA should maintain cordial relationship not only with DEN but also with all other sub divisional officers and also educate the office staff and subordinates about proper maintenance of records, submission of accounts returns, preparation of budget etc
In the open line divisions also a SO (Works) is posted under the DEN designated as Works Accountant. The functions are the same as DA. However, he is not considered as he head of divisional works branch but will be the head of works accounts section.
The DA is considered as the head of the office establishment of the DEN. While checking accounts and returns whenever the DA finds any irregularity, he should bring to the notice of DEN. If DEN differs from the views of DA he records his orders and the same should be carried out. In such cases DA should maintain a register as DA’s Internal Check Register and enter the same with full details in the register and obtain the remarks of DEN therein. This register is put up to any visiting officer for information
The DA should not however, be made responsible for any cash transaction except emergent cases not exceeding four months.
The DA should maintain cordial relationship not only with DEN but also with all other sub divisional officers and also educate the office staff and subordinates about proper maintenance of records, submission of accounts returns, preparation of budget etc
In the open line divisions also a SO ( Works) is posted under the DEN designated as Works Accountant. The functions are the same as DA. However, he is not considered as he head of divisional works branch but will be the head of works accounts section.

MATERIAL AT SITE ACCOUNTS

MATERIAL AT SITE ACCOUNTS
For works estimated to cost each Rs 1 lakhs or Rs 3 lakhs for relaying or track renewal work in relaxation of the limit of Rs 25000/-.
for stores not used up immediately
suspense head – on receipt of materials is debited with the cost of stores and is credited with issued of materials for work
daily record of such material in form E 1737 materials obtained for work on receipt are entered under with quantity, issued note and reference – Receipts: issues of stores for consumption, the date, quantity, sub head charged are recorded under – Issues . Materials issued but surplus – Minus Issues
materials released from the work are separately recorded as receipts with date, quantity on their utilization of the works shown as issues Materials retuned to stores transferred or otherwise deposed of is shown as minus receipts
works costing more than Rs 1 lakh to Rs 3 lakhs for relaying or track renewal works- monthly Return is sent containing only those items for which there have been any receipts or issue transactions during the month.
the monthly MAS a/c returns may be followed by a complete MAS a/c return for all the items of each quarter June, September, December & March on the basis of monthly returns from sub ordinates, the Divisional Officers prepare monthly adjustments get them approved by DEN and AO for necessary adjustment
periodical verification by the executive in charge for works costing more than Rs 1 lakh to Rs 3 lakhs for relaying or track renewal a. P Way material b. other MAS which can be readily operated and distinguished from any of the description but by a different category all items verified at least once in a year.
A certificate that such verification has been carried out should together with a note as to whether or not the materials were found to be duly depreciated, be furnished on the MAS returns this is in addition to stock verification.
At the end of every financial year the AO prepares a schedule of MAS balances of works of Rs 1 lakh to Rs 3 lakhs for relaying or track renewal and review in consultation with the executive.
At the end of every month, an excess materials return should be prepared in the prescribed proforma in respect of all the completed works. These returns should show separately for materials obtained and material released, the numerical balance only of MAS i.e. those that have neither have been consumed on the work nor returned to stores, transferred or otherwise disposed of and the ate of completion of the work to which they relate. If the excess materials cannot be utilized in some other work they should be returned to stores.

SENSITIVITY ANALYSIS

SENSITIVITY ANALYSIS

1. simplest of handling risks
2. magnitude in the ROR by small change in the components of which are uncertain
3. selct variable –whose estimated values may contain significant errors or elements of uncertainty
4. key variables are – cost, price, project life, market share etc
5.
Cut off rate
Selling pricegraph

Sales when decline
N P V
Cost of fixed assets
Working capital
Variables cost







Adverse change in variable percentage

Advantage:
1. identify crucial variables that makes greatest impact in the NPV of the project
2. graphical presentation – better visual appeal
3. by confining SA to adverse changes in the variable that can be reasonably expected to occur one can obtain range of NPV that can be reasonably anticipated
4. knowledge is helpful for making decisions

Railways Risk Factors:
1. land - delay in acquisition – litigation
2. earth work availability of sand
3. soil condition – geographical factors –weak/loose Eg TEN-NGC line due to weak soil
4. alignment due to local or popular demand Eg KRCL in Madgaon line in Goa State
5. availability of sleepers – wooden/ Pre Stressed Concrete Sleepers – snags in production- ban on wooden sleepers as environmental policy of the Govt
6. availability of rails – change in the production pattern of the steel mills – delay in production- change in the Govt policy
7. estimated earnings – net production of commodities short fall in projected and traffic due to climatic and natural causes – import and export potential
8. delay in rolling stock in ordered quantity Eg Hassan – Mangalore line for transport of ore to Port of Mangalore diverted to road
9. cost and time over runs – likely delay due to paucity of funds/allotment

Preparation of the Preliminary Works Programme
609. The Chief Engineer of the Railway will be primarily responsible for ensuring that the proposals prepared by the various departments are complete in all respects and are correctly prepared. The overall priorities within the ceilings given by the Board will also be fixed by him in consultation with the General Manager and other Heads of Departments. He will be responsible for the preparation and timely submission of the Preliminary and the Final Works Programme.
610. In or about June/July each year the Railway Board should convey to each Railway, in respect of each Plan Head, the total outlay within which the Works Programme should be framed by the Railway. A list of the Plan Heads is given in Annexure I. On receipt of this financial ceiling the Railway Administration should take stock of the schemes already formulated and those under consideration and select for inclusion in the Works Programme within the financial ceiling such works as are expected to yield the maximum benefit to the Railway preference being given to works in progress. Further necessary changes in the investment schedule may be made in order to work within the financial ceiling for the year such modification., being taken note of in framing the Preliminary Works Programme and revising the financial implications. if necessary.
611. The Preliminary Works Programme for the following year should be submitted by the Railways to the Railway Board by 1st week of September or such earlier date as may be laid down by the Board. Proper financial appraisal of each work should be given in the Preliminary Works Programme together with the comments of the Financial Adviser and Chief Accounts Officer.
612. The project cost should be based on firm data both as to quantity and rates at current price levels. and should any increase occur in prices during the period intervening between the initial preparation of the project estimate and its inclusion in the Works Programme. the estimate should be updated taking into account any significant changes in the wages and material prices as well as increase in freights and fares. No other increase such as on account of change in scope of the project should be allowed without prior reasons being adduced for acceptance by the Railway Board. A sketch showing the proposal should accompany each proposal.
613. Each investment proposal should be accompanied by a detailed plan showing the scheduling of the project to match the traffic requirements and the financial outlay proposed for the year should be in accordance with this project schedule to enable the Railway Board to arrange for a realistic funds allocation for implementation of the programme.
614. In deciding the outlays for the various works Railway Administration must endeavour to progress all works in progress speedily and bring them into use at the earliest possible date. A work which has been sanctioned and for which funds have been allotted whether in the original or supplementary budget of a year should be treated as a "work in progress" for the next year and provided for as such in the programme. Such works should be grouped as indicated in para 619.
615. The Railway Administrations should make a realistic assessment of the amount required for each work in progress and necessary provision should be made for it in the Works Programme. In estimating the provision for works during the budget year a generous allowance should be made for those delays in execution which though unforeseen are known from experience to be so liable to arise particularly prior to inception anti during the initial stages of large projects. The provision made should take into account adjustment of charges on surveys connected with a project.
616. In exhibiting the outlay for the current year against individual works in the works programme, the outlay should be as per Pink Book, and in exceptional cases where the Railways propose any substantial increase in the outlay with corresponding reductions against other works, such revised outlay may be shown separately in brackets below the outlay as furnished in the Pink Book duly explaining the reasons for doing so in footnotes at the appropriate places. As far as possible only the last sanctioned costs should be exhibited. Wherever it is visualised that the cost would involve an excess over the last sanctioned cost, effective steps should be taken well in time to have the revised estimate prepared and sanctioned by the competent authority before the Works Programme is sent to the Board. In case where the revised estimates are sanctioned subsequent to the despatch of the filial Works Programme but before the end of January of the following years the same should be promptly advise to the Board to enable to the latest sanctioned cost being exhibited in the Pink Book to be circulated alongwith the Budget. In all cases of revised costs sanctioned by the Board, reference to the letter of sanction should invariably be indicated.
617. Works once introduced through a Works Programme (including Track Renewal Programme) and taken up after the estimates have been sanctioned by the competent authority should continue to be included every year till they are finally completed, except in cases where the works have reached the completion stage and where funds required if meagre could be found by re-appropriation.
618. The Works Programme is compiled in the following format:-
Form E. 618
WORKS PROGRAMME 1975-76
Demand No................. (Figures in thousands of rupees)



Note.-Years have been shown in the form for the purpose of illustration.


In respect of "Works in Progress" reference to item No. of the current year's Pink Book and also the authority under which the work was first started should be indicated. The works should be arranged as per the Plan Heads.
619. The items in the Works Programme should be grouped under the following categories while compiling the Works Programmes:-
(i) New Works.
(ii) Works in Progress.
(ii) Works approved in earlier years, which have not been actually commenced and on which no expenditure has been incurred till 30th June of the year previous to the Programme year.
(iv) Works approved in the earlier years but estimates for which have not been sanctioned by 30th June of the year previous to the Programme year.
620. The works are further made into sub-groups of (i) Works costing more than Rupees Five Lakhs each and (ii) Works costing upto Rupees Five lakhs each. Under (ii) works costing upto Rupees two lakhs each in the case of Track Renewal works and for works costing upto Rupees one lakh each in the case of other works only lumpsum provision should be shown without detailing individual works. Within each sub-group, the works are presented under each Plan Head.
621. A map showing the Railway System and indicating the new lines, doublings, major yard remodelling, important line capacity and signalling works which are in progress as well as proposed should be attached to the Works Programme. An alphabetical index of works and various managerial information regarding critical materials, expenditure position relating to passengers and railways users amenities etc. which will be prescribed by Railway Board should be included.
622. Integrated Budget.-The Annual Budget of Railways consists of assessment of earnings and expenditure forming part of Revenue Budget and that relating to the investment decisions taken through the Works Machinery and Rolling Stock Programmes. In order to co-relate the decisions relating to all these aspects, a consolidated budget called integrated Budget including Revenue Budget, Works Programme and the Machinery and Rolling Stock Programmes should be submitted by the Railways alongwith the preliminary Works Programme. The Integrated Budget will include the projections of traffic and earnings, working expenses, the estimated financial results for the ensuing year, and the operating ratio in the proforma specified by the Railway Board. The Railways should also furnish the details of Rolling Stock required on replacement account and addition account, duly co-relating it to the anticipated increase in traffic. In the covering note to the Integrated Budget the Railways should bring out the effect of the budget proposals on the efficiency of operations as indicated by the operating ratio and the financial viability of the system as revealed by the financial returns on capital investment. After discussion of the Preliminary Works Programme, a revised Integrated Budget should be submitted along with the Final Works Programme duly taking into account the changes that might have taken place in the meantime. The Integrated annual budget may be prepared under the personal guidance of the General Manager and with the assistance of Financial Adviser and Chief Accounts Officer.
Final Works Programme
623. After having examined the individual Railways Programme, and discussions with the General Managers, the Railway Board will decide the works which should be undertaken during the following year and which should be included in the Final Works Programme. The Railway Administration will then modify their Works Programmes as a result of the Board's decision and send their Final Works Programme to the Railway Board by the stipulated date.
Section II- Works Budget
624. Works Budget.-The revised and budget estimates for the construction, acquisition and replacement of assets are briefly known as Works Budget. The revised estimate gives an estimate of funds required for the current year and the budget estimate refers to the following year. For a detailed study of the Railway Budget, Chapter III of the Indian Railway Financial Code should be referred to. The budget estimate for the works are based on the Works Programme approved by the Board. The requirement of funds both for new investments and for works in progress are submitted in the form of "Demand for Grants" in the Works Machinery and Rolling Stock Programme which forms a part of the Budget papers presented to the Parliament. While compiling the Works Machinery and Rolling Stock Programme for presentation in the Parliament only works costing Rupees five lakhs and above are itemised.
Demand for Works Grants
625. The proposal of Government in respect of sums required to meet the expenditure from the Consolidated Fund of India are to be submitted in the form of Demands for Grants to the Parliament. The Demand shall be for gross expenditure, the credits or recoveries (refer to para 335 of Indian Railway Financial Code) being shown in the form of footnotes to Demands.
The Demand for Grants for the Works Budget is :-
Demand No. 16 :-Assets-Acquisitions, Construction and Replacements.
Financing of Works Budget
626. Works chargeable to Demand No 16.- Assets-Acquisitions Construction and Replacements are financed from railway revenue when it is charged to OLWR or financed from Capital. Depreciation Reserve Fund. Development Fund, Accident Compensation Safety and Passenger Amenities Fund. Expenditure budgeted under "Capital" involves increase in the Capital-at-charge of the Railways and hence is the liability for payment of dividend to General Revenue subject to the relief/exemptions granted by the Convention Committee. "Works Expenditure" of the Railway is thus financed from Revenue, Railway Funds and Capital provided by the General Revenues. The Railway Funds are Depreciation Reserve Fund, Development Fund and Accident Compensation Safety and Passenger Amenities Fund. For Details regarding the operation of the funds, reference may be made to Chapter III of the Indian Railway Financial Code. In the event of the railways revenue surplus not being adequate to fully meet the requirements of Development Fund Expenditure, the budgetary support from the General Revenues would also include temporary loans to finance expenditure from the Development Fund. The expenditure under works Budget of the Railways is, therefore, determined by the resource allocation under various Plan Heads.