Abhi Project 1

8/8/2019 Abhi Project 1

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PROJECT REPORT

ON

BUDGET AND BUDGETARY CONTROL

ATCARRIAGE WORKSHOP LTD.

LALAGUDA, SEC- 500 017.

Submitted by:

SANKET KUMAR RATHI

In partial fulfillment for the award

Of the degree in

Bachelor of commerce (Honors).

JAGRUTI DEGREE & P.G. COLLEGE.

(Affiliated to Osmania University).

Narayanaguda, Hyderabad-500 029.


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ACKNOWLEDGEMENT

This is an acknowledgement of the intensive drive and

technical competence of many individuals who have contributed tothe success of my Project Report.

I express my deep sense of gratitude and indebtedness to the

following eminent personalities who helped for the successful

completion of my Project work.

I would like to take the pleasure of this opportunity to

express my heart full gratitude to my project guide Mr.B.S.Srinivas Rao for his valuable help and constant guidance afforded in

suggesting me the various topics and the lines of approach and

for the kind co-operation and encouragement I had from him,

enabled me to pursue this study. I would also like to thank our

respected principal Mr. Ram Kumar of Jagruti Degree and P.G.

College and our Vice Principal Mrs. Josephine for their support

and guidance.

I am thankful to Mr.Satya kumar (CI) Carriage workshop,who helped to complete this internship successfully.

Finally, I thank my family members and all my friends who

directly or indirectly helped me a lot during the completion of my

Project.

SANKET KUMAR RATHI


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DECLARATION

I here by declare that the Project report entitled

BUDGET AND BUDGETARY CONTROL IN CARRIAGE

WORKSHOP LALAGUDA is an original and bonafide work done

by me in partial fulfillment of the requirement for the award of the

Degree in Bachelor of Commerce (honors).

I further declare that it has been carried out by me as a

student of Jagruti degree & P.G. college, Narayanaguda,

Hyderabad, during May 2008 and the same is not submitted elsewhere for the award of any degree or diploma either in part or full

in any University/Institute.

The contents of this report are based on the data and

information collected by me during my assignment at Workshop

department of Carriage workshop, at Lalaguda, secunderabad.

Place:

Date: SANKET KUMAR RATHI.


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INDEX

CHAPTER INDEX PAGE NO.

INTRODUCTION

Importance

Scope

Objectives

Methodology

Sampling

Hypothesis

Limitations

(1-11)

ORGANIZATION PROFILE

Introduction of Carriage Workshop

Organization Structure

Financial Organization Back round

(12-25)

ABOUT THE STUDY

Railway Budget

Preparation Of Budgets Compilation and Scrutiny

Administering of Budgets

Budgetary and Expenditure Control

Financial Reporting

(26-63)

V DATA ANALSIS & INTERPRETATION (64-75)

V

FINDINGS, SUGGESTION & CONCLUSION

Annexure

Bibliography

(76-79)


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INTRODUCTION

Every concern may it be a governmentagency, Non-profit institution, Business firm and evenhouseholds prepare budgets according to theirenvironmental requirements. The chances of variationsbetween estimates and actual and also its consequencesneed to be evaluated in the light of prevailing conditions fortaking future decisions. Budgeting requires where there is aninvestment or expenditure and a source of receipt or income

and its utilization is involved. Nothing can be achievedwithout a proper planning and control.

A Budget is considered to be a plan of action inthe future (or) a detailed plan of income and expensesexpected over a certain period of time. A budget can provideguidelines for managing future investments and expenses. Agood budget is one, which motivates the employees andother concerned persons to reach the budgeted targets.

Budget helps the management in the followings ways

To think in a systematic form about the future.

Serves as a co-coordinating device

It also serves as a standard for performance appraisal.

To control and plan at various levels of organization.

You get a better idea of how youre going to do in thelong run.

Thus to prepare a budget one does not requireexceptional brilliance but a plan which will and does work inpractical scenario.


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DEFINITIONS:

Institute of Chartered ManagementAssociation, defines Budget as A financial and/orquantitative statement prepared and approved prior to thedefined period of time, of the policy to be pursued duringthat period for the purpose of time of attaining a givenobjectives. It may include Income, expenditure andemployment of capital

A budget is a spending plan used to allocate

resources to accomplish an organization's objectives. Thismanagement tool coordinates anticipated expenditures in aneffort to maximize resources. A budget is time-specific, andit must be flexible to respond to financial and programmaticchanges. A budget, in effect, serves as a financial road mapfor an organization.

GREGORY ERVIN

BUDGET CONTROL INVOLVES:

Achievements of specified targets laid down in plan.

Systematic record of actual execution or performance

of wok.

Comparing the actual with those budgeted ones.

Reporting the ascertained variances to management forcorrective action.


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NEED FOR BUDGET:

To aid the planning of annual operations.

To plan the firms operations and resources.

To measure the financial growth of the concern.

To motivate the managers to strive for the organizationgrowth.

To delegate and make responsible various organizationcenters.

ADVANTAGES OF BUDGETING:

Reinforce the management process of planning ahead.

In fact, budgets compel the managers to think andanticipate of future challenges; formulate strategies,etc so as to achieve the desired companys goals.

A budget is in reality a set of plan. This plan is createdby all the relevant managers to create a course ofaction for future actions.

Aid in resource planning and allocation, key or scarceresources or capital expenditure are carefully reviewedduring the establishment of the budgets.

Promote continuous improvement. In the budgetingstage, non-value.


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Adding activities shall be eliminated; new or enhancedprocesses are designed to increase productivity, etc.

IMPORTANCE OF BUDGETING:

Budgeting enables the management inattaining the maximum level of profits.

All the levels of employees can be coordinated toreach the goals in harmonious environment.

Budgeting targets the goals of each level, whichmakes the employees to reach their specific aims.

Actual are compared to that of budgeted ones, whichhelps in measuring the performances.

It is economical as every thing set right and avoidsdelays and other circumstances.

As control is delegated at each level it is easy to

pinpoint the disturbances and corrective actions maybe taken at proper time.

Perfect plan and coordination and communicationbetween different levels reduce the cost and cangrab the profitability opportunities.

Introduction of incentives schemes encourages thepeople to reach or obtain the budgeted targets.


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SCOPE OF THE STUDY:

The study covers very comprehensively

Budgeting of the company itself through the Budgetanalysis. Though the study is very comprehensive, it ishaving its own limitations as follows:

The study is based on the data presented in

annual report of CARRIAGE WORKSHOP; thereforethe accuracy of the study depends on the accuracyof the data and information provided in the report.

The study is mainly carried out based in thesecondary data provided in the financial statements.

The study is based on the historical data and theinformation provided in the annual reports therefore,

it might not be a future indicators.

There may be some fractional differences in thecalculated budgeting process of the companybudgets.

As the study period is short (3 years) the revisedBudgets may not give a correct view about thecarriage workshop performance.


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OBJECTIVES OF BUDGETING:

Budget provides the yardstick against which futureresults can be compared.

With the establishment of the budget, action(s)can be taken by management if there are anymaterial variances against budget.

Budgets enable management to plan and

anticipate in areas of adequacy in working capitaland scarce or type of availability of resources.

Budgets are able to direct capital expenditure inthe most profitable direction.

Assist to plan and control earnings andexpenditure so that maximum profitability can beachieved.

It acts as a guide for management decisions whenunforeseeable conditions affect the budget.

Fixation of responsibility of various individuals inthe organization.

Assist in decentralizing responsibility on to eachmanager involved. With the setting of budgets, themanagers involved will better understand what the

company expects from them.

Therefore there is a congruence of goalsbetween the company and the employees.


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PROCESS OF BUDGETARY PLANNING:

Budgeting is a tool of planning. Planninginvolves the specifications of the basic objectivesthat the organization will pursue and the fundamentalpolicies that will guide it.

It is a system which uses the budgets forplanning and controlling business activities. It quantifies andis financially oriented to guides the managers to achievecertain business objectives. Managers will compare theactual with the budgeted figures and the variances will thenbe investigated and corrective actions be taken.

In operational terms it involves four steps.

Objectives defined as the board and long-rangedesired state position of the firm.

Specified goals-targets in quantitative terms to beachieved in a specified period of time.

Strategies or specific methods/course of action toachieve these goals.

Budgets to convert goals and strategies in toannual plan.


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METHODOLOGY:

A facility prepares a budget based on prior

years spend, using inflation and other factors to create whatthey feel are appropriate expense targets for theirdepartments and organization.

Departments manage expenses based solelyon projections, without any thought given to the operationalaspect of their organization as well as a lack of quantifiable

data to support their budget figures.

First of all, the Organization profile of thecompany acquired through which basic activities if theorganization using past and present conditions were known.

Secondly, the internal analysis is done toknow the procedure for preparation of Budget Estimates.

Budget Estimates are compared with theactual to compute the variance. Reasons for the variances inbudgeting were observed and stated.

Finally, observations and conclusions weredrawn from observing the performance of organization forthe past five years.


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SAMPLING:

The data can be collected in two ways,

Censes Method

Sampling Method

In censes method the data may becollected by complete population. It wills reliable results.In sampling a part of population is selected thus samplingis the process of selection and from this sample

conclusion are drawn again sampling the data is collectedfrom primary source and secondary source.

In primary source the data is collected fromthe concern person by way of questioner and personalinterview. The other institutions collect secondary data ororganization and we use for our purpose. It may bepublished data and is easy to get.

The important method of sampling is

Random Sampling

Stratified Sampling

In random sampling samples are takenrandomly while in stratified sampling the data is divided intostrata and then samples are taken. I have collectedinformation through the sampling method from Carriage

Workshops books of records. Such as financial statements,etc.


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HYPOTHESIS:

A hypothesis is a statement about thepopulation parameter. The meaning of the termHYPOTHSIS IS MAKING ASSUMPTION. In testing samplessome assumption is made and testing is done and thenconclusion is drawn. A hypothesis is testing is a procedurethat helps us to decide whether the hypothesized orassumed population parameter value is to be accepted orrejected by making use of the information obtained from the

sample.

As this is a financial and organizationalstudy no assumptions are required. It is clearly about theBudgetary controlling of CARRIAGE WORKSHOP fromvarious Budgets and information provided.

A hypothesis is a supposition made as abasis for reasoning all scientific theories are tested forsetting up a hypothesis against the observation. As study is

related to finance and organization no such attempt is made.Hypothesis is nothing but test or proof.


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LIMITATIONS OF BUDGETING:

Budgeting is concerned about future, which isuncertain, and predictions made may not come true.

Budgeting requires frequent revisions, which results inhuge expenditure.

Efficient persons may be disappointed and it alsodiscourages as sometimes acts as constraints onmanagerial initiatives.

Success of it completely depends on coordination andso the performance of one department depends onanother.

It is expensive, as every concern cannot afford toappoint a budget officer.

It is expensively depends upon top-level management.

Sometimes it may lead to conflicts in consultation withallocation of resources to each department.


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CARRIAGE WORKSHOP

LALLAGUDA, SECUNDERABAD 500 017

BRIEF HISTORY:

Carriage Workshop, South Lallaguda, Secunderabad, a premier repair

workshop of Indian Railways was established on 30th September 1893. This

workshop was under the aegis of THE NIZAM GUARANTEED STATE

RAILWAYS for undertaking periodic overhauling and repairs to BG and

MG steam locomotives, coaches and wagons. Subsequently it was brought

under the purview of NIZAM STATE RAILWAYS.

The reorganization of Railways in 1951 made this workshop an

integral part of Central Railway and subsequently with the formation of

South Central Railway on 2nd October 1966 it became a major workshop of

the zone. It continued to be composite workshop for MG and BG rolling

stock till 1969 when repair to MG rolling stock was off loaded to Hubli

workshop in phases from 1969 to1973. With the closure of Steam Locos

from 1992 the workshop now handles only coaches of all types and therefore

is renamed as Carriage workshop. This workshop occupies an area of

13.97 hectares with 4.25 hectares under cover.

MILESTONES


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1893 Came into Existence as Loco, Carriage and Wagon

Workshops

Under NIZAMs GUARANTEED STATE RAILWAY.

1951 Came under Central Railway.

1966 Came under South Central Railway.

1973 Periodical Overhaul of Meter Gauge Rolling Stock was

off loaded to Hubli Carriage Workshop.

1975 Took up Periodical overhauling of Broad Gauge Steam

cranes.

1986 Introduced Air Conditioned Coach Periodical

Overhaul.

1988 New Mini Computer was commissioned.

1991 Conversion of 24 Volts to 110 Volts.

1992 Stopped Periodical Overhaul of Steam locomotives

andincreased Carriage Periodical overhaul.

1993 Taken up manufacture of Switch Expansion Joint and

joggled

Fish Plates for Engineering department.

1997 Renamed as CARRIAGE WORKSHOPS.

1998 Converted coal fired Cranes to Oil fired.

2000 ISO 9002 Certification.

2003 POH of DHMU coaches was started.

Conversion of Vacuum brake coaches to Bogie

mounted Air brake system.


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Injury free coaches.

ORGANISATION CHART

OF

CARRIAGE WORKSHOPLALLAGUDA, SECUNDERABAD

Chief Workshop Manager

VASHISHTA JOHRI

WAO

K.V. SATYANARAYANA

DY. CMEHEM SINGH DY. CEED.V.S. RAJU

CMT

B.V. SATHYANARAYANA

WPOSIDDHARTH KATI

AEE

MALLIKARJUN RAO

WM

DURGA PRASAD

PE

AWAO

VIJAYNATH

AWM P

N. SAI BABA

AWM C

H. VEDA MURTHY

AWM B

B. MADHAVA CHARY

AME / LOFP

SATYANARAYANA REDDY


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FINANCIAL ORGANIZATION HISTORICAL BACKROUND

At the dawn of the 20th Century, nearly fiftyyears after the first Railway train steamed out of BoriBunder, there were thirty three separate RailwayAdministration in India, operating over 41,000 routekilometers of railway lines. Of these, four were worked byGovernment, five by the erstwhile Indian States, and theremaining 24 by private Railway Companies. The Non-Government Railwaysi.e., other than the four owned anddirectly worked by the Governmentoperated under varying

degrees of Government supervision. Their regulation andcontrol vested in the Railway Branch of the Public WorksDepartment of the Government of India. The Departmentwas headed by an officer of the Indian Civil Service who wasa member of the Viceroy and Governor General's ExecutiveCouncil. He was assisted In the Railway Branch, by oneSecretary, three Deputy Secretaries (one each for Traffic.Accounts and Construction), 4 Under Secretaries and 4Assistant Secretaries. The entire Railway system was divided

into seven circles, and a team of one Consulting Engineer,and one Government Examiner of Accounts was posted toeach of these seven circles. The accounting and auditingfunctions for the whole Department, including the RailwayBranch, were combined In the Accountant General, PublicWorks Department.

In October 1901, the Secretary of Statefor India in Council appointed Sir Thomas Robertson, C.V.0.,as Special Commissioner for Indian Railways to enquire intoand report on the administration and working of the IndianRailways. In his report (1903), Sir Thomas recommendedsetting up of a Railway Board consisting of a President orChief Commissioner, and two other Commissioners all ofwhom should have a practical knowledge of railway mattersand should be 'men of high railway standing'. The Board


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should be assisted by a Secretary, a Chief Inspector ofRailways, the necessary number of ordinary inspectors andthe requisite number of Government Auditors.

As a consequence of these

recommendations, it was decided early in 1905 to abolishthe Railway Branch of the Public Works Department and totransfer the control of the Railway systems to a RailwayBoard consisting of a Chairman and two Members. TheRailway Board assumed office in March, 1905, directlyresponsible to the Government of India in the Department ofCommerce and Industry, and their staff included amongstothers an Examiner of Accounts, re-designated in thefollowing years as Railway Accounts Officer.

Within a short time, however, the set upwas re-organized on the recommendations of the RailwayFinance Committee (1908) by constituting the Railway Boardwith its staff as the Railway Department distinct from andindependent of the Department of Commerce and Industryunder the same Member of the Viceroy and GovernorGeneral's Executive Council. The designation of theChairman, Railway Board, was changed to that of thePresident of the Railway Board who was to have direct

access to the Viceroy and Governor General. At the sametime, consequent upon the amalgamation of the Accountsand Civil Audit Establishments of the Public WorksDepartment under the control of the Finance Member of theGovernment of India, the post of Accountant General, PublicWorks Department was abolished and a separate, post ofAccountant General, Railways was created.

The most important land mark in the history

of the financial administration on Railways in India was theappointment of the Financial Commissioner for Railways inApril. 1923. With the sanction of the Secretary of State forIndia, as part of the scheme of re organization of the RailwayBoard as recommended by the Acworth Committee (1921).

The declared object of this appointment was to secure,firstly, economy in the expenditure of public moneys and.


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secondly, the co-ordination of Railway policy with thegeneral financial policy of the Government of India. This wasfollowed by the Separation Convention of 1924 by whichRailway finances were separated from the General Finances

of the Government of India.

The Financial Organization on the Railways hasthus evolved through the following five stages, viz.

Stage I:

The stage prior to the appointment of the FinancialCommissioner for Railways, when the Railway financeadministration was a part of the Finance Department of the

Government of India. The accounting work was done by theAccountant general. Railways, under the administrativecontroller of the Auditor General.

Stage II:

Appointment of the Financial Commissioner ofRailways in April. 1923 as stated in the preceding paragraph.

Stage III:

Completion of the process of separation of theAccounting & Auditing functions on the Railways in 1929 as asequel to the recommendations of the Acworch Committeesupported in the, report of Sir Arthur Lowes Dickinson(August. 1927). Under this arrangement, the post ofAccountant General, Railways (then under the administrativecontrol of the Auditor General) was replaced by

(I) The Controller of Railway Accounts responsible to

the Financial Commissioner Railways, and theDirector of Railway Audit under the AuditorGeneral.

(II) At the Railway level also the two functions wereseparated by appointing a Chief Accounts Officeranswerable to the Controller of Railway Accounts,and a Chief Auditor responsible to the Director of


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Railway Audit. This incidentally, marked thebeginning of the Indian Railway Accounts Serviceas a Cadre distinct from that of the Indian Auditand Accounts Service.

Stage IV:Placing of the Railway Accounts Department

under the General Manager where upon the Chief AccountsOfficer was placed under the administrative control of theGeneral Manager 'instead of the Financial Commissioner.Railways. This organizational change was recommended bythe Indian Railway Enquiry Committee. 1937. (more

commonly known as the Wedgwood Committee) on thepattern of the British Railway practice to ensure full contactand adequate co-ordination between the General Managerand his Chief Accounts Officer. While making this change onthe Indian Railways, the Chief Accounts Officer wasredesigned as the Financial Adviser & Chief Accounts Officer.

It was however, a condition precedent tothis arrangement that the Financial Adviser and Chief

Accounts Officer would have access to the FinancialCommissioner in all important matters on which he might bein disagreement with the General Manager not only asregards accounting regularity but also on questions offinancial prudence. This arrangement was initially tried as anexperimental measure on two State Railways (the NorthWestern Railway and the Great Indian Peninsular Railway)with effect from November, 1938 and was .made permanentin 1941 when it was extended to all Government Railways.

Stage V:

Setting Up of a distinct Finance Branch under theFinancial Adviser & Chief Accounts Officer for placing at the'disposal of the General Manager, an improved machineryfor financial advice and control. Again, this scheme was


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initiated as an experimental measure in November, 1947 onone of the Railways, the then B.B & C.I. Railway, and waslater adopted permanently on all Indian GovernmentRailways.

With the completion of the above-mentioned five stages, the administrative and financial set-up of the Ministry of Railways (Railway Board) has achievedits present unique character viz.,

(a) This Ministry has been fully delegated with powersrelating to all Railway matters;

(b) The Railway Ministry (Railway Board) is managed entirelyby railway men, and

(c) The Railways have their own independent and integratedfinancial set up, i.e.

(i) Railway budget is independent of the Generalbudget,

(ii)The Railway Ministry enjoys full powers of financialsanction to expenditure, and

(iii) Accounts are maintained by the Railway's ownaccounting cadres and not by the Comptroller &

Auditor General.

The Financial Commissioner. Railways are theprofessional head of the Railway Financial Organization andrepresents the Government of India, Finance Department onthe Railway Board. In his capacity as ex-officio Secretary to


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the Government of India in the Ministry of Railways infinancial matters, he is vested with full powers of theGovernment of India to sanction Railway expenditure subjectto the general control of the Finance Minister.

This arrangement is intended to ensure thatfinancial control over operations of the Railway Departmentis exercised from within the Organization by an officer whoshares with the Members of the Railway Board and theChairman the managerial responsibility as a senior partner inthe common enterprise of efficient and economic working ofthe Railway undertaking. In the event of a difference ofopinion between the Financial Commissioner and other

Members of the Boards the former has the right to refer thematter to the Finance Minister.

In the discharge of his responsibilities ashead of the Railway Finance Organization, the FinancialCommissioner, Railways may issue or cause to be issued,instructions to the Financial Adviser & Chief Accounts Officeron all accounting and administrative matters. Theseinstructions will be communicated to the General Managerand it is the duty of the Financial Adviser & Chief AccountsOfficer to give effect to them. The latter should, however,keep the General Managers in touch with suchcorrespondence as may be exchanged by trim direct withthe Financial Commissioner. Railways or officers in theRailway Board working under him.

At the time of the initial transfer of controlover the Railway Accounts Department to the GeneralManager, the following stipulation was made by the Railway

Board on the functions and responsibilities of the FinancialAdviser & Chief Accounts Officer in regard to tendering offinancial advice


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"At present the duty is imposed on theChief Account Officer of advising the General Manager tomake a reference to the Railway Board in the event of theformer disagreeing with the latter on any matter of financialor accounting importance. or making such a referencehimself should the General Manager 'be unwilling to do so.

The change involved in the proposed delegation of control of

the Accounts Department will not relieve the Chief AccountsOfficer of this obligation. It will on the contrary lead toemphasize his special responsibility in this regard which itmust be clearly understood relates not .only to matters ofaccounting propriety but also to important matters offinancial prudence, whether within the financial powersdelegated to the General Managers or not."

The main function of the Finance Branch

under the control of the Financial Adviser & Chief AccountsOfficer is to assist the Railway Administration in consideringall proposals involving financial implications in accordancewith the generally accepted standards of financial prudenceand propriety. In the business of rail transportation, as in anyother business, there is hardly any activity or service whichdoes not involve considerations of finance in some form orthe other The Finance Branch Is thus an important limb ofthe Administration and its functions are broadly analogous to

those of the Management Accountant, viz., to assistmanagement

(a) In making rational plans and decisions,

(b) In controlling the operations of the RailwayAdministration as a whole, and


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(c) In controlling the operations within the various

responsibility areas of the Administration.

The role of the Finance Officer has changed,over the years, from that of a mere 'friendly critic" to one ofcomplete 'management participation". This role is in no wayabated by the fact that in case of disagreement, when hehas been over-ruled by the General Manager, the FinancialAdviser & Chief Accounts Officer may request the GeneralManager to make a reference to the Railway Board for

orders, and the General Manager would be under anobligation to make such a reference incorporating thereinfairly and fully the comments and views of the FinancialAdviser & Chief Account Officer. The success of the FinanceBranch would depend on the spirit and the manner in whichits services are utilized by the Executive Departments. Therelations between the latter and the Finance Branch should,like all inter-departmental relations, be based on mutualconfidence and free and full consultation.

One of the important functions of theFinancial Adviser relates to compilation of budgets andsetting up of a satisfactory system of Budgetary Control.'While the initial preparation of the budgets is theresponsibility of the Departmental Officers-concerned, thescrutiny and compilation of the Railway's Budget as a wholewill be the responsibility of the Financial Adviser & ChiefAccounts Officer.

The Financial Adviser & Chief AccountsOfficer is assisted at the Head quarters office by aDeputy/Additional Financial Adviser who, in turn, has anumber of Accounts Officers reporting to him in connectionwith their respective duties involving financial scrutiny ofproposals emanating from various departments of theRailway Administration. The Deputy/Additional Financial


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Adviser is also the Budget Officer of the Railway and, ashead of the Budget Branch of the General Manager, he isexpected to exercise control over the budgetary allocationsof the Railway Administration.

While at the Headquarters level theFinancial functions, as distinct from the functions of internalcheck, are performed by a separate group of officers, boththese functions are combined at the Unit level in theDivisional Accounts Officer, or the Workshop/Stores AccountsOfficer as the case may be.

The scope of financial scrutiny of proposals

before obtaining the sanction of the competent authoritymay broadly be considered under the following twosituations:

(a) Where a proposal is within the powers delegated to theGeneral Manager and officers subordinate to him; or

(b) Where the proposal requires reference to the RailwayBoard, being either beyond the powers of the General

Manager or involving an important matter ofprinciple/policy.

In the case proposals of involvingfinancial implications, which require reference to the RailwayBoard, It is necessary to furnish not only the technical andadministrative aspects of the case but also a review of itfrom the financial angle, such a review being based on allthe information which may be locally available. It isobligatory on the Railway Administration to furnish to the

Board a verbatim copy of the opinion expressed by theFinancial Adviser & Chief Accounts Officer with every suchproposal, unless it has his unqualified concurrence in whichcase the fact that he has concurred in the proposal shouldbe indicated in the letter addressed to the Railway Board.


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The Financial Adviser & Chief AccountsOfficer's appreciation of the proposal accompanying theAdministration's letter should be sufficiently comprehensiveand should not only contain his comments, if any, on the

facts adduced in justification of the proposal but should alsomention its financial and budgetary implications and hisviews as to its financial prudence.

For the speedy disposal of business, theCentral Government has delegated most of their powers infinancial matters to authorities subordinate to them. Thesepowers have to be exercised, inter alia, subject toobservance of the rules and accepted standards of financialpropriety. Proposals which are within the competence ofsanction of the General Manager and authorities subordinateto him, and which require prior consultation with theFinancial Adviser & Chief Accounts Officer, should besubjected to close scrutiny from the point of view of need,scope and financial propriety of the proposal in the same

manner as in the case of proposals which are referred to theRailway Board for orders.

There can be no hard and fast rules on how

precisely the financial, scrutiny of proposals received fromthe Executive Departments should be carried out. Theobjective is to secure maximum efficiency in railwayoperations at the minimum cost, without unduly sacrificingone for the other. The functions of Railway Finance Officers

have now developed beyond the traditional bounds of thoseof the financial Accountants. These are no longer restrictedto tendering advice to the Administration whenever requiredor necessary in all matters involving railway finances. TheFinance Officer's job as a Management Accountant is tofurnish and interpret financial statements, compile cost data


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and prepare cost reports, explore avenues of controlling staffand material costs, institute and operate budgetary controlprocedures, and participate in all Capital expenditure andrating/pricing decisions. This involves an irrevocable

commitment to Management, and calls for a high degree ofprofessional training and competence. At the same time theFinance Officer should see that the standards of financialpropriety, expected of all Public Servants in the operation ofpublic funds, are strictly observed.

STANDARDS OF FINANCIAL PROPERTY:

In the exercise of their financial powers, thesanctioning authorities must pay due regard to the followingprinciples:

(1) The expenditure should not prima facie be more than theoccasion demands, and that every Government servantshould exercise' the same vigilance in respect of expenditureincurred from public moneys as a person of ordinaryprudence would exercise in respect of the expenditure of hisown money.

(2) No authority should exercise its powers of sanctioningexpenditure to pass an order which will be directly orindirectly to its own advantage.

(3) Public moneys should not be utilized for the benefit of aparticular person or section of the community unless

(i) The amount of expenditure involved is insignificant;or


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(ii)A claim for the amount could be enforced in a courtof

law;

(iii)The expenditure is in pursuance of a recognized

policy

or custom.

(4) The amount of allowances, such as traveling allowances,granted to meet expenditure of a particular type, should beso regulated that the allowances are not on the wholesources of profit to the recipients.


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RAILWAY BUDGET

BUDGET - A Constitutional and Management Document

Article 112(1) of the Constitution ofIndia prescribes that 'the President shall in respect of every

financial year cause to be laid before both the Houses ofParliament a statement of the estimated receipts andexpenditure of the Government of India for that yearreferred to as the "annual financial statement" and popularlycalled the "Annual Budget". Though the constitutionalrequirement is only that the 'financial statement' shallcontain a statement of the estimated receipts andexpenditure for the coming financial year, as a matter ofpractice, every budget contains three elements-

(a) A review of the preceding year, including theactual receipts and expenditure in that year ;

(b) An estimate of the receipts and expenditure of the

comingyear; and


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(c) Proposals, if any, for meeting the requirements of

thecoming year.

Though the Constitution does not provide forthe presentation of the annual financial statement or Budgetin parts, the Rules of Procedure of Parliament have providedthat 'nothing shall be deemed to prevent the presentation ofthe Budget to the House in two or more parts and when suchpresentation takes place, each part shall be dealt with inaccordance with the rules as if it were the Budget'. Thisprovision has enabled the Separation of the Railway Budgetfrom the General Budget and the passing of separate

Appropriate Acts for each of these Budgets in keeping withthe Separation Convention (1924).

Voted and Charged Expenditure:

Article 112(2) of the Constitutionprescribes that the estimates of expenditure embodied inthe annual financial statement shall show separately-

(a) The sums required to meet expenditure charged

upon the Consolidated Fund of India; and

(b) The sums required to meet other expenditureproposed to be made from the Consolidated Fundof India.

The expenditure proposed in the Budget may,

therefore, be either

(i) Voted.

(ii) Charged.


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Article 113(1) of the Constitution providesthat 'the estimates of expenditure charged upon theConsolidated Fund of India shall not be submitted to the voteof Parliament'. There is, however, no restriction on either

House of Parliament discussing any of these estimates,where after funds are sanctioned by the President.

Article 113(2) requires that estimates of votedexpenditure "shall be submitted in the form of demands forgrants to the House of the People (Lok Sabha) and the Houseof the People shall have power to assent, or to refuse toassent, to any demand, or to assent to any demand subjectto a reduction of the amount specified therein".

Article 113(3) enjoins that no demand for a grantshall be made except on the recommendation of thePresident.

Charged Expenditure:

In respect of Railways, the followingexpenditure is "charged" on the Consolidated Fund of India

(i) The salary, allowances and pension payable to or in

respect of the Comptroller and Auditor General of India;

(ii) Any sums required to satisfy any judgement, decreeor award of any Court or awards by Arbitrators where madeinto rule of court; and

(iii) Any other expenditure declared by the Constitution

or by Parliament by law to be so charged.Apart from its significance as an instrument of

Parliamentary financial control, the Railway Budget is animportant management tool. Broadly the financial forecastin the Budget is related to the performance targets set forRailway Administrations, and it is the responsibility of the


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Railway Managements to ensure the achievement of theseassociated targets.

DEMANDS FOR GRANTS

The proposals of Government in respect ofsums required to meet expenditure from the ConsolidatedFund of India are to be submitted in the form of "Demandsfor Grants" to the Lok Sabha. The Demands shall be forgross expenditure; the credits or recoveries being shown inthe form of footnotes to Demands.

Pursuant to the recommendations of RailwayConvention Committee 1971, a Task Force was constituted

by the Government in July 1973 to examine certain aspectsof budgetary, accounting and management practices on theRailways. In their First Report the Task Force maderecommendations for the restructuring of the Formats andContents of Demands for Grants and the manner in whichthe Railway Budget should be prepared.

The recommendations made by the TaskForce along with Government's decisions thereon have beenconsidered by the Estimates Committee (1978-79); and the

Formats and Contents of Restructured Demands for Grantseffective from lst April, 1979.

The salient features of restructured Demands forGrants are as under:

(i) Expenses are broadly grouped by activities as an aidto developing budgets and analysing actual expensesagainst budgeted expenses.

(ii) The Demands No. 1, 2 & 3 are in the nature ofgeneral on-cost, Demand 1 & 2 covering all Railways andDemand 3 individual Railway Administrations.

(iii) There is a single works Demand for all worksExpenditure irrespective of source of financing.


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(iv) Each Demand has two-way classification by activity

and by Primary units of expenditure. The activityclassification identifies 'why' an expense item is incurred.

The behaviour of costs in relation to changes in trafficvolumes at each activity location thus provides a data basefor revising the budget in response to changing volumes ofoutput. The primary unit (object) of expenditure on theother hand, identifies 'what' the expense item denotes, i. e.,by way of labour, materials etc

(v) The Budget classifications have been completelyaligned with the Accounting classifications.

The functional orientation of both the BudgetaryDemands for Grants and the accounting classificationensures a complete concordance between the sub-heads ofthe Demand for Grants and minor heads of accountingclassification on the one hand and the detailed activityclassification of the Demands for Grants with the Sub headsof Accounting Classification on the other.

(vi) The Demands for Grants are to be presented in

two Parts:

Part I-All RailwaysPart II-Individual Railways

Each, Part will have 3 sub-divisions-

(a) Sub-heads of the Demands representing majorfunctions/activities.

(b) Detailed Heads representing a further break-

up of the activity of classification i.e. identifyingwhy of the expenditure in greater detail.

(c) Primary Units (Objects of Expenditure)

identifying 'what' the expenditure denotes i.e.--


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Salary

Wages

Allowances

Materials, etc.

(vii) The activity classification combined with theaccounting by primary units of expenditure provides a built-in mechanism for isolating fixed costs like generaladministration and permanent sanctioned labour fromvariable and semi-variable costs like cost of materials, costof temporary labour, travel expenses, incentive, runningallowances etc. The scheme is however, by no means suchas to correlate expenditure directly with units ofperformance.

The authorities responsible for control overexpenditure against budget provision in each Demand.

For the preparation of the Budget by the Railway Board,the Railway Administrations and other authoritiesempowered to incur expenditure are required to submit tothe Railway Board their revised estimates for the current

year and budget estimates for the following year on thedates prescribed below :-

Estimate of Earnings 20th

DecemberRevenue Demands 2 to 15 1st

DecemberCivil Estimates 15th

December

Works Demand 16 23rdDecember

The revised estimates are required in respect of thecurrent year and Budget Estimates for the following year.

The forms in which the estimates should be prepared arefurnished each year by the Railway Board to the authorities


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concerned and the instructions for the filling up of the formsare printed on the back thereof.Glossary of terms used:

The following is a glossary of the termswhich the Railway Administrations should use in theirestimates and other connected documents. The terminologygiven in the glossary should be followed uniformly by allRailway Administrations and no departure should be madethere from in any circumstances:

GLOSSARY OF TERMS

(i) Coaching Earnings (less refunds)

(ii) Goods Earnings (less refunds)(iii) Traffic Earnings = (i)+(ii)(iii) Sundry Other Earnings (less refunds)=Other than

TrafficEarnings.

(v) Gross Earnings = (iii) + (iv) = true or accruedearnings in an accounting period whether or not

actually realised Suspense.(vi) Gross Receipts = (v) + (vi) = Earnings actuallyrealised during an accounting period.

(vii) Miscellaneous Receipts = Guarantee recoverablefrom

State Governments + Other MiscellaneousReceipts, such

as Government share of surplus profits, sale ofland of

subsidized companies, receipts from surcharge

onPassenger fares, etc.

(ix) Total Revenue Receipts = (vii) + (viii).(x) Ordinary Working Expenses = Expenses booked

underfinal heads.


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(xi) Appropriation to Depreciation Reserve Fund.(xii) Appropriation to Pension Fund.(xiii) Gross Working Expenses = (x) + (xi) + (xii) = True

expenses in an accounting period whether or not

actually disbursed.(xiv) Suspense.(xv) Gross Expenditure = (xiii) + (xiv) = Working

Expenses actually disbursed during an accountingperiod.

(xvi) Miscellaneous expenditure = Surveys + Land forsubsidized companies subsidy + otherMiscellaneous Railway expenditure,Appropriations to Pension Fund relating to RailwayBoard and Miscellaneous establishments booked

under grants 1 & 2 and Accident Compensation,Safety and Passenger Amenities Fund.

(xvii)Total Revenue Expenditure = (xv) + (xvi).

Note:The "Surplus or Shortfall" shown in item (xxi)

differs from the "gain or loss" given in Account No. 110 ofthe Finance and Revenue Accounts of the Government ofIndia, as besides dividend , the former takes into account all

the Miscellaneous Receipts (viii) and Expenditure. (xvi)attributable to a Railway, whereas the latter does not.(xxii)Capital-at-charge represents the Central

Government's investment in the Railways by way of LoanCapital and value of the assets created there from.

PREPARATION OF BUDGETS BY RAILWAYADMINISTRATIONS .

Responsibility for framing the Estimates:

Preparation of the Revised and BudgetEstimates should commence at the 'grass root level , i.e.,Division, Workshop, Stores Depot etc., as the case may be.

The entire responsibility for framing the estimates devolvesupon the spending/earning authorities concerned, though


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the actual work of compilation and scrutiny would rest withthe Financial Adviser and Chief Accounts Officer who wouldalso draw the attention of the General Manager to matters ofpurely financial import.

The estimates should be as accurate aspossible and, to achieve this object, care should be taken tosee that the data on which the forecast is based is adequateand reliable and that the conclusions arrived at from thedata can be sustained by past experience and futureexpectations of likely event

The Revised and Budget Estimates shouldbe framed by the various concerned authorities in keeping

with the instructions given below separately for-

(i) Gross Receipts;(ii) Ordinary Working Expenses;(iii) Payments to Worked Lines;(iv) Appropriation to and expenditure to be met out of

Railway Funds;(v) Payment to General Revenues;(v) Works Expenditure; and

(vii) Civil Estimates.

GROSS RECEIPTS

The estimates of Gross Receipts are requiredin the form and should be prepared in quadruplicate, the

various figures being given in thousands of rupees.Information should be furnished in accordance with theinstructions printed on the reverse of the form. Two sets ofthe estimates of earnings should be prepared, one on thebasis of originating earnings and the other with reference toapportioned earnings. The two sets of figures should be sentto the Railway Board both for the Revised Estimates for the


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current year and the Budget Estimates for the followingyear.

Coaching Earnings:

Earnings from each class of passenger trafficviz., Air conditioned, First and Second, should be estimatedon the basis of passenger kilometres and the average fareper passenger kilometre for each class separately

The earnings from coaching traffic, otherthan passenger, parcel and military traffic, may beestimated on the basis of a ratio of the earnings frompassenger traffic to be determined with reference to the

previous actual.

Goods Earnings:

Estimate for the commodities which,yield the bulk of the Railway's revenue, should be based onthe anticipated net tonne kilometres (NTKM) to be carried,and the average yield per NTKM, for each commodity. Theearnings from the rest of the commodities should be

assessed in lump sum, based on the trend of events in theimmediate past, the experience of the past years and, so faras it is possible to ascertain, the influence of changingconditions in the future.

Sundry Other Earnings:

The miscellaneous earnings of a railway

are derived mainly from the following sources:-

(i) Telegraph;(ii) Rent and tolls;

(iii) Commercial Publicity;(iv) Catering;(v) Sale proceeds of grass and trees; and


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(vi) Interest and maintenance charges on account of'assisted sidings, saloons, postal vehicles, etc.

The earnings from these sources arecomparatively small and should be estimated on the basis of

previous actual and any other circumstances that may beknown or foreseen at the time.

Receipts of Worked Lines:

The receipts of worked lines should beincluded in the receipts of the main lines under the severalsub-heads and also the total should be shown separately inthe estimates.

Refunds of Revenue:

The figures of refunds of revenue shouldbe deducted from the estimated receipts under each sub-head and the figures for gross receipts should be given net(after deduction of refunds).

Explanation of variations in receipts:

The estimates should be accompanied bya brief narrative explanation of the figures of actual earningsfor the first seven months of the current year, especially ifthey show any pronounced change from those for thecorresponding period of the preceding year.

The estimates of originating goods traffic (intonnes) based on the actual of the first 7 months andexpectations for the last 5 months of the current year shouldbe given separately for

(i) traffic moved to and from the steel plants byprincipal categories (other than coal) such as rawmaterials, finished products like steel manufactures,pig iron and alloy steel,

(ii) Coal for Steel Plants, Washeries, and other users,


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(iii) Cement,

(iv) Export ore,

(v) Fertilisers,

(vi) POL products,

(vii) Food grains, and

(viii) General Goods. The increase/decrease anticipated inthe originating tonnage during the current year overthat of the preceding year under each of the

categories of goods traffic mentioned above shouldalso be given specifically in a statement annexed tothe earnings estimates.

Review of Traffic Outlook:

These explanations are required notonly to enable the Railway Board to judge whether the

estimates are reasonable, but also to assist them inexplaining them to the Parliament. What in fact is wantedfrom the General Manager is a very brief review of the trafficoutlook for the current and ensuing years which can be usedfor assessing the total traffic prospects of the Railways

ORDINARY WORKING EXPENSES

The estimates of working expenses requiredfrom Railway Administrations are so arranged that sub-heads of Demands 3 to 14 as detailed, are in alignment withminor heads of Accounting Classification under Abstracts Ato N. The order in which the Demands 3 to 14 correspond toAbstracts A to N is as shown below;


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Demand No.

Name of Demand Name of abstractunder RevisedAccountingClassification

3 General Superintendence &services on Railways

A- GeneralSuperintendence &Services.

4 Repairs & Maintenance of Way & Works.

B- Repairs &Maintenance, Way &Works.

5 Repairs & Maintenance of Motive Power

C- Repairs &Maintenance ofMotive Power.

6 Repairs & Maintenance of

Carriages & Wagons

D- Repairs &

Maintenance ofCarriages & Wagons.

7 Repairs & Maintenance of Plant & Equipment

E - Repairs &Maintenance of Plantand Equipment.

8 Operating Expenses-RollingStock & Equipment

F- OperatingExpenses -RollingStock & Equipment.

9 Operating Expenses-Traffic

G--Operating

Expenses-Traffic.

10. Operating Expenses-Fuel

H-OperatingExpenses-Fuel.

11. Staff Welfare & Amenities.

J-Staff Welfare &Amenities.

12. Misc. Working Expenses

K- Misc. WorkingExpenses.

N-Suspense.13. Provident Fund, Pension &

other Retirement Benefits.

L-Provident FundPension and otherRetirement Benefits

14. Appropriation to Funds M-Appropriation toFund.


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A few examples of concordance between the sub headof the restructured Demands for Grants and the minorheads of revised accounting classification are also

given below:

DemandNo.

Sub-heads ofDemands

Abstract No.

Minor Heads ofAccountingClassification.

3, General,Superinundence& Services

(a) GeneralManagementincludingGeneralManagement

Services

A. 100 GeneralManagementincluding generalmanagementservices

(b) FinancialManagement

A. 200 FinancialManagement

(c) PersonnelManagement

A 300 PersonnelManagement

(d) MaterialsManagement

A. 400 MaterialsManagement.

(e) Way &WorksManagement

A 500 Way &WorksManagement.

(f) Rolling StockManagement

A. 600 Rolling StockManagement

(g) ElectricalManagement

A. 700 ElectricalManagement

(h) Signalling &Telecom.Management

A. 800 S. & T.Management

(i) TrafficManagement

A 908 TrafficManagement

4.RepairsandMaintenance Way&Works

(a) Cost ofestablishment insubordinateoffices

B. 100 Establishmentin subordinateoffice.

(b) Maintenanceof P. Way

B 200 Maintenanceof P. Way.


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(c) Maintenanceof Bridges &

Tunnels

B 300 Maintenanceof Bridges &

Tunnels(d) Maintenance

of ServiceBuildings

B. 400 Maintenance

of ServiceBuildings.(e) Water Supply,Sanitation &Roads excludingcolonies staffqrs. and welfarebuilding.

B. 500 Water Supply,sanitation, etc.(other thancolonies, staff

quarters &Welfare buildings.)

(f') Other repairs& maintenance

B. 600 Other repairs& maintenance

(g) Special,repairspertaining tobreachesaccidentsincluding specialrevenue works.

B. 700 Special,repairs pertainingto breachesaccidents includingspecial revenueworks.

Explanation of variations:

A brief narrative explanation should begiven of the causes of substantial differences between thefigures adopted for the revised estimate of the current yearand

(i) The actual of the previous year, and(ii) Budget allotment for the current year. Similar

explanation should be given for differences between

the figures of the budget estimate of the ensuingyear and the revised estimate of the current year.Large variations which compensate each othershould also be indicated.

The revised estimate for the current yearand the budget-estimate for the next year should be fixed


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after taking into account the expenditure of the previousyear and comparing the expenditure during the first sevenmonths of the year with the corresponding period of theprevious year

When the expenditure anticipated in thelast five months of the year is disproportionate as comparedwith

(i) The first seven months of the year or(ii) The corresponding period of the previous year,

reasons for the disproportionate expenditure shouldbe given in the revised estimate. Special and non-recurring items of expenditure in a year should show

a corresponding saving in the following year.

Estimate of Cost of Establishments

In working out the cost of establishments,the Railway Administrations should not make any meticulouscalculations of the emoluments to which individuals will beentitled if they continue to hold the posts during the year.

The estimates of the cost of establishment should be based

on past experience of their actual cost, with due allowancefor any changes either in the number or rates of pay of eachindividual establishment in the year in which, or for whichthe estimate is being made.

Suspense Heads:

The estimates in respect of revenue suspenseheads should be prepared by the Financial Adviser & ChiefAccounts officer on the basis of past actual and currenttrends. Budget for Demands payable is for the net increaseor decrease in the balance at the end of the year, while forMisc. Advances the budget requirement would be on a'gross' basis.


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Repairs and Maintenance Expenditure ofRolling Stock:

The budget and revised estimates ofexpenditure on repair and maintenance of Rolling Stock,carriages, wagons and other coaching vehicles Included inDemands No. 5 and 6 should be supported by separatestatements showing in detail the estimated number ofRolling Stock proposed for repairs in the current year'sbudget and revised estimates and the budget of the ensuingyear with corresponding unit cost.

Cost of Fuel:

Two statements, one showing the quantityand cost of coal, diesel oil and electricity and anothershowing the quantity and freight of coal carried by seashould be submitted along with the revised and budgetestimates for Operating Expenses Fuel. Care should betaken to furnish complete information as required in the'Correlation Statements' accompanying the revised andbudget estimates.

Miscellaneous Expenditure:

This includes expenditure budgeted underDemands. For transactions with Company Railways underseparate estimates should be prepared for payment ofsubsidy/rebate and /or share of earnings to worked lines inkeeping with the terms of Contract with each Railway.

List of Credits or Recoveries:

(a) The following items of credits or recoveriesshall be excluded from the scope of the demands presentedfor vote of Parliament:


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(i) Commission on account of internal check of militarywarrants and credit notes in connection with the militarytraffic.

(ii) Hire and haulage charges of rolling stock from Port TrustRailways or other non-budget lines.

(iii) Service contributions from other Departments/Ministrieson account of staff on deputation.

(iv) Credits for released material relating to renewal andreplacement works and also those released fromrepair and maintenance works.

(v) Credits for electrical energy supplied to outsiders, otherRailways, Government Departments and consumed forpurposes other than traction.

(vi) Sale proceeds in Canteens. State Government grants toschools, fees from students, etc.

(vii) Credits under "Suspense" heads.-

(a) Issue from Stores Suspense.(b) Issue under Manufacture Suspense.(c) Credits under "Miscellaneous Advances"

(viii) Credits on account of unconnected loco coal wagons;

(ix) Credit for freight charges on railway materials includingfuel;

(x) Deficit in the net earnings pertaining to worked linesrecoverable from State Governments etc;

(xi) Write back of cost of military sidings initially charged tocapital;


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(xii) Cost of cinders and coal ashes sold and utilised fordepartmental purposes;

(xiii) Credits on account of Inspection charges on coal;

(xiv) Share of cost of works chargeable partly to RailwayEstimate recoverable from other departments ofCentral Government.

(xv) Miscellaneous receipt under classification of worksExpenditure;

(b) The following items of credits or recoveries shall be

taken in reduction of Demands and only net figures (minus

or plus) shall be shown under the respective detailed headsof the Demands:

(1) Credits on account of accounting adjustmentssuch as-

(a) Credits realized from surplus stock, found in stockverification, etc.(b) Credits on account of surplus stock transferred

from one work to another Chargeable to same oranother grant or to stock.

(c) Credits to Capital or Depreciation Reserve Fund orother heads on account of Write-back adjustments,etc.

(d) Credits for overcharges and undercharges underrepairs.

(ii) Credits on account of the rebate for purchases madethrough Supply and Disposals Department.

(iii) Credits under "Demands Payable" and "UnpaidWages".

Summary of Ordinary Working Expenses:


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The Railway Board should be furnishedwith a summary of the ordinary working expensescomparing, under each demand, the actual during each ofthe preceding three years, with the budget estimates and

revised estimates for the current year and budget estimatesfor the following year. The figures of actual should agreewith those appearing in the final accounts intimated to theRailway Board and the differences, if any, should be suitablyexplained in the remarks column.

Summary of Revenue Receipts andExpenditure:

In order to represent the financialposition of a railway correctly, the estimates of its receiptsshould be correlated with the estimates of its expenditure.For this purpose the Railway Board should be furnished,along with the estimates for gross receipts, with a statementsummarising the estimates for gross receipts andexpenditure chargeable to revenue. These should containthe figures for the previous year, the budget and revisedestimates of the current year and the budget estimates forthe following year.

Payments to General Revenues:

Payments to General Revenues arise in respect of(a) Dividend on Capital-at-charge,(b) Contribution for grants to States in lieu of

passenger fare tax,(c) Contribution for assisting the States for financing

Safety Works,(d) Repayment of loans and interest thereon,

borrowed on a temporary basis from GeneralRevenues to finance Development Fund;

Works Machinery and Rolling Stock Budget:


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The revised and budget estimates forexpenditure on construction, acquisition, and replacement ofassets are prepared in the form of the Works Machinery and

Rolling Stock Programmes. Detailed instructions for thepreparation and submission of the Rolling Stock Programmesand the Machinery and Plant Programme are contained inIndian Railway Code for the Mechanical Department(Workshops). The Works Programme is required to beprepared in accordance with the instructions embodied inChapter VI of the Indian Railway Code for the EngineeringDepartment.

There is one single Demand for Grant for

Works Budget viz. Demand No, 16-Assets Acquisition,Construction and Replacement; and expenditure whethermet out of loan obtained from the general exchequer orinternal resources of Railways viz., Revenue', the,Depreciation Fund', the 'Development Fund' and 'AccidentCompensation, Safety and Passenger Amenities Fund'; In thecase of last named fund, expenditure on safety works andpassenger amenities works only, is included in this Demand.Works Demand provides for booking of expenditure by

various Plan heads and for the purpose of link with theaccounts Central Government, the Plan heads form the MinorHeads of Railway Works Expenditure, under the Major Heads.

Inventories:

The revised and budget estimates for inventoriesviz. store in stock, works-in-process in workshops andproduction units, other stores transaction such as purchase,

sales and Miscellaneous Advances (Capital) AssetsAcquisition, Construction and Replacement. The value of theinventory under these heads is held as part of the Railways'Capital-at-charge. The revised and Budget Estimates for theinventories depend on various factors.


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Civil Demands:

To enable the Ministry of Finance toincorporate the requirement of and/or information relating to

the Ministry of Railways regarding staff advances and othertransactions which form part of the General Budget, theRailway Board has to obtain from- the RailwayAdministrations for transmission to the Ministry of Finance anumber of statements. These are dealt with below.

Income tax, Interest on Advances by CentralGovernment and Interest on Debt and otherObligations:

The estimates of income-tax and interestshould be submitted in the form.

Debt Heads and K-Deposits and Advances:

These estimates are required by the RailwayBoard in the form.

K-Deposits and Advances and F-Loans andAdvances, by the Central Government:

The revised and budget estimates ofadvances should he submitted to the Railway Board in theform.

Remittance Transactions:

The estimates of remittance transactionsshould be submitted to the Railway Board in the detailshown in form. The estimates should be framed, as far aspossible, in conformity with those of the other party to thetransaction, and wherever there are any importantdifferences which it is not possible to reconcile the


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differences should be specifically mentioned in theexplanatory notes to the estimates.

COMPILATION AND SCRUTINY OF

BUDGET IN THE RAILWAY BOARD

The estimates of working expensessubmitted by individual railways are subjected to a criticalexamination by the Railway Board and, after taking all therelevant factors into consideration, the Railway Board frametheir own estimate of the expenditure likely to be incurredduring the year.

The procedure adopted by the RailwayBoard in fixing the allotment for each railway is as follows.

The revised estimate for the current year is first fixed undereach demand for each railway, after taking into account theexpenditure for the preceding year and comparing theexpenditure during the first seven months of the currentyear with the corresponding period of the previous year, fullconsideration being paid to the special feature of both years.

Having thus fixed the revised estimate forthe current year, the budget estimate for the next year isprepared on a consideration of the special circumstances sofar as known, of both years. The amounts provided forindividual railway administration are restricted as nearly asthe Railway Board can assess to their actual need, consistentwith the exercise of the most rigid economy.

Submission to the Minister:

The estimated amount required for Planexpenditure during the next year is intimated to the PlanningCommission/Ministry of Finance for necessary provisionbeing made in the Way and Means budget of the


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Government of India and after it has been ascertained fromPlanning Commission. Finance Ministry that funds will beavailable to meet the estimated expenditure, theprogrammes are submitted to the Minister for approval.

The rolling stock and plant and machineryprogrammes, as approved by the Minister, are subject tofurther modifications which may subsequently necessary dueto one or other of the following causes :-

(i) If any item of rolling stock and plant and machineryordered for delivery in the current year is not deliveredbefore the end of the year and remains unpaid, it becomesnecessary to provide money in the programme for the nextyear for such items as will be delivered in that year.

(ii) Later information may suggest alterations in theestimated prices at which the stock can be purchased.

(iii) When, owing to the early date on which theprogrammes are prepared, other modifications may be foundnecessary during the course of the year.

Presentation to the ParliamentThe complete Budget that is, the

demands for grants and the other Budget papers, viz., the

explanatory memorandum to the Budget and the detailedestimates of each railway with a summary will be presentedto the Lok Sabha and the Rajya Sabha. Before the Demandsfor Grants are presented to the Parliament, therecommendations of the President should be obtained underArticle 113 (3) of the Constitution.

Appropriation Bill

Pursuant to Article 114 (1) of the Constitution,after the Demands for Grants have been voted by the LokSabha, there shall be introduced a Bill to provide for theAppropriation out of the Consolidated Fund of India of allmoneys required to meet the grants so made by the LokSabha and the expenditure, If any, charged on theConsolidated Fund of India, but not exceeding in any case


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the amount shown in the Statement previously laid beforethe Parliament. The Appropriation Bill as passed by theParliament and assented to by the President forms the basisfor budgetary allocation to the Railways.

ADMINISTERING THE BUDGETDistribution of Funds by the Railway Board

The Grants as voted by the Parliament andthe appropriation for the charged expenditure as sanctionedby the President are distributed by the Railway Board amongthe railway administrations and other authorities subordinateto them, as soon as possible, after the Budget is sanctioned.

The sums so distributed are called "Allotments" and the

orders by means of which the allotments are made arecalled "Budget Orders". The allotments made out of fundsvoted by the Parliament are shown as "Voted" and thosefixed by President are shown as "Charged".

The Budget Orders are accompanied by

the final issues of " Demands for Grants" and Works,Machinery and Rolling Stock Programmes" containing thedetailed distribution of the Budget allotment made to the

railway administrations for working expenses and Capital,Depreciation Reserve Fund, Development Fund, Open LineWorks (Revenue) and Accident Compensation, Safety andPassenger Amenities Fund expenditure.

The Budget allotment made to a railwayadministration is intended to cover all charges, including theliabilities for past years, to be paid during the year or to beadjusted in the accounts for it. It shall be operative until theclose of the financial year. Under the 'doctrine of lapse', anyunspent balance shall lapse and shall not be available forutilization in the following year.

Distribution of Funds by General Managers toLower-Authorities:


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Subject to the other provisions of thischapter, or of any general or specific orders issued by theRailway Board, a General Manager is expected to take stepsimmediately to distribute the funds, placed at his disposal, to

authorities subordinate to him in such manner as he mayconsider most suitable.With respect to expenditure on works, the

allotment made by the General Manager to lower authoritiesshall, as for as possible, follow the lines of the Works,Machinery and Rolling Stock Programmes issued by theRailway Board that is--(i) A specific sum shall be allotted by him for each item of

rolling stock and for each individual work estimated to

cost over one lakh of' rupees. The General Manager mayalso allot specific sums for other works for which heconsiders desirable to keep separate accounts, i.e., abovea certain minimum to be prescribed by him,

(ii) A lump sum shall be allotted by him for all work which areindividually estimated to cost less than the minimumlimit prescribed by him.

(iii) The conditions under which and the extent up to whichauthorities under him may sanction re-appropriations

between the sums allotted for individual works hall bespecified by him in making the allotment, and Any re-appropriation in excess of that admissible under clause.

(iv) From the sum allotted for an individual work or any re-appropriation from and to the lump sum allotted underclause (ii) above shall require the prior sanction of theGeneral Manager.

The authorities to whom funds are distributed by the

General Manager may, subject to any general or specialinstructions issued by him, redistribute the fund placed attheir disposal to the authorities under them.


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Responsibility of the Railway Board to avoidExcess over Grants or Expenditure on a NewService/New Instrument of Service:

It is the responsibility of the Railway Boardto ensure that the total expenditure against a grant voted bythe Parliament or appropriation sanctioned by the Presidentdoes not exceed the amount of the grant or of the

appropriations. They are also required to watch that themoney voted by the Parliament is spent on the purposes setout in the detailed estimates presented to the Parliamentalong with the Demands for Grants and is not utilized forexpenditure on New Service/New Instrument of Service notcontemplated in the Budget.

Responsibility of Railway Administrations incase of Excesses or Lapses:

The railway administrations shall beresponsible to ensure that no expenditure is incurred inexcess of the Budget allotments made to them. Should itbecome apparent at any time that the grant for the year islikely to be exceeded from any cause whatsoever, theGeneral Manager should report the position to the RailwayBoard and apply for additional funds. No liability may beincurred in one year against anticipated grants of a

succeeding year except that advance commitments forprocurement of stores for works may be made as provided tothe extent authorised by the Railway Board from time totime.

Powers of Railway Administrations in regard toemergent and inevitable expenditure:


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Not withstanding the provisions, thecommencement of works urgently necessary to safeguardlife or property or to repair damage to the line caused by

flood, accident, earthquake or other. Un-foreseencontingency, so as to restore or maintain throughcommunication may be authorized by the ExecutiveEngineer; but he should at once submit a report through theusual channel to the authority competent to giveadministrative approval to the work and to allot the requiredfunds.

Re -appropriations :

The transfer of funds, originally assigned forexpenditure on a specific object to supplement the fundssanctioned for another object is called "Re-appropriation".

Powers of the Railway Board:

Within the amount of a grant as voted by theParliament, the Railway Board have full power of transferringthe provision from one sub-head to another by a formalorder of re-appropriation, but re-appropriations from onegrant to another are not permissible. Under Grant No. 16 nore-appropriation of funds is permissible between Capital,Railway Funds and Revenue even though re-appropriation ispermissible between the various sub-heads of grant viz. thevarious Plan heads

Powers of Railway Administrations:

No re-appropriation is permissible between"Voted" and "Charged" allotments or between the allotmentsmade under one grant and another. In the case of Grant No.16, no re-appropriation is permissible between the capital,railway funds and revenue. The re-appropriations-


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(i) To and from the provision for the following planheads under Grant No. 16:(a) New Lines (Construction),(b) Gauge conversion,

(c) Electrification projects,(d) Track renewals,

(e) Staff quarters, Staff Welfare Works(f) Amenities for staff, -do-(g) Passenger amenities & other Railway users

amenities;(ii) To and from the provision for "Payments to other

railways" in Grant No. 9, and

(iii) To and from the provision for "Suspense" in GrantNos. 12, require the prior approval of the RailwayBoard.

The amount allotted to the railway

administrations under the Civil Grant for "Interest on debtand other obligations and reduction or avoidance of debt" isdistributed under the following units of re-appropriations,viz :-

(i) State Provident Funds,(ii) Railway Staff Benefit Fund,(iii) Eastern Group Steeper Control Provident Fund,(iv) Indian Railways Conference Association

Employees' Provident Fund,(v) Depreciation Reserve Fund Railways,(vi) Revenue Reserve Fund,(vii) Railway Development Fund,(viii) Accident Compensation, Safety and Passenger

Amenities Fund, and(ix) Pension Fund.

No re-appropriation is permissible from one unit to another.

Other re-appropriations may be sanctionedby the, railway administrations but no re-appropriations are


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permissible after the close of the financial year, i.e., 31stMarch. The re-appropriations by railway administrationsshould not be, made haphazardly on the basis of individualitems of expenditure where the original provision is

exceeded, not should they be postponed to be made onlytowards the end of the year.

BUDGETARY & EXPENDITURE CONTROL

FINANCIAL /MANAGEMENT REPORTING

The annual Railway Budget is aninstrument of both Parliamentary financial control andexpenditure control. The manner in which budgetary andexpenditure control is exercised is stated in the followingparagraphs.

Gross Earnings:

It is important that a continuous andconcurrent watch is kept on the realisation of earnings asenvisaged in the Budget. This is done through the mediumof a ten-day statement of earnings on "originating" basis, the

statement the last period of the month giving also theposition for the month and the cumulative position from IstApril to end of month. These statements should give also theproportionate budgeted earning on originating basis and theactual for and to end of the relevant period of the precedingyear for comparison. The originating basis is adopted tosecure prompt reporting since the Railway wise apportionedearnings for each month do not become available until a fewweeks later.

A monthly statement of 'approximate' gross

earnings on the basis of estimated apportionment betweenvarious Zonal Railway is also sent by the Railways to theRailway Board by the middle of the following month in Form344-Al. This statement should be compared with theproportionate budget for and to end, of the month to see the


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extent of variations, if any between the budget and actualascertain the causes thereof and take such steps as arenecessary.

Revenue and works Expenditure:

As all Railway expenditure, other than thatcharged on the Consolidated Fund of India, is voted in the

form of the Demands for Grants, the budgetary control isintended to ensure that expenditure is incurred for thepurposes and within the limits, as voted by Parliament. Theauthorities responsible for the control of expenditure againsteach Grant are detailed.

While it is the duty of the Railway Board, asthe controlling authority in respect of the total amount ofeach Grant voted by the Parliament and Appropriation

sanctioned by the President, to watch the progress ofexpenditure and to keep the Aggregate charges within theamount of the Grant or Appropriation placed at theirdisposal, it is the responsibility of the individual railwayadministrations to exercise a similar control over theallotments placed at their disposal. When several officers areauthorized to incur expenditure relating to a sub-head,against a lump sum allotment placed at the disposal of asingle higher authority, it devolves upon this authority, towatch the progress of expenditure in all the concernedoffices and to keep the aggregate charges within theallotment fixed under that sub-head.

Revenue Expenditure:


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The revised and budget estimates ofordinary working expenses submitted by the GeneralManager to the Railway Board are based on detailed-estimates of revenue expenditure obtained by him from the

various heads of departments of the railway. On receipt ofthe allotment from the Railway Board, these detailedestimates may require modification consistent with theallotment sanctioned by the Railway Board or as may bedeemed necessary by the General Manager.

Proportionate Budget allotment: For the purpose of carrying out ameaningful comparison of the actual working expenses for(and to end of) the month with the budget allotment, it isnecessary to distribute the sanctioned allotment for the yearover the twelve months after taking all known factors ofdisturbance or special features into account. While theresponsibility for the control of expenditure against thebudget allotment devolves upon the authority at whose

disposal the allotment has been placed, it is the duty of theAccounts Officer, in his capacity as the financial adviser tothe Administration, to render all possible assistance to thecontrolling authorities in the exercise of such control.

Accordingly, he works out, at the beginningof each financial year, in consultation with the officersresponsible for the control of expenditure, the estimatedprogressive expenditure under each sub head of a grant

keeping in view the following factors:

(i) Throw forward from the previous year.(ii) All expenditure whether in cash or by transfer, the

liability


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for which already exists, but which is not likely tobe

distributed evenly during the year, whetherbecause it is

of a periodical nature, or because it is contingenton the

receipt of supplies, or for any other reason.

(iii) Expenditure which is practically fixed and evenlydistributed throughout the year.

(iv) Other expenditure which is likely to be incurredduring the

year but liabilities for which have yet to be incurred.

(iv) The need to keep some amount as a reserve formeetingfresh or unanticipated expenditure.

Monthly Statement of Approximate Receiptsand Expenditure:

A statement of approximate receipts and

expenditure under such heads as may be prescribed shouldbe sent to the Railway Board so as to reach them not laterthan the l5th of the month following that to which the figuresrelate except for the months of July, October and January inwhich case the statement may be sent not later than 20thof the following month to which the figures relate.

Revenue Allocation Registers:

All revenue expenditure is to berecorded in Registers, which are known as RevenueAllocation Registers, by the various heads of accountsprescribed in the classification given in Appendix I (VolumeII). The object of these registers is to keep the heads ofdivisions, and departments informed of the progress of


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expenditure against the allotments placed at their disposalby the General Manager, which should be entered in red inkin the appropriate columns provided for in these registers, soas to form a ready means of comparison and check with the

outlay.

Monthly Financial Reviews:

The monthly reviews show theexpenditure to the end of the previous month, against theallotment placed at the disposal of the controlling authoritiesunder each sub-head of the grant for which they areresponsible. The review should be prepared in Form No. 513and submitted to the controlling authorities every month, bysuch date as may be fixed in consultation with them.

Form No. F. 513sub-

headsof

grantand

headsof

account.

Budget

allotm

ent for1974-

75

Proportionate

budget

allotmentTo end of

June,1974

Actualexpendit

ure to

end ofJune,1974

Actualexpenditure to

end ofJune,1973

Expenditureupto June-1974

more (+) or

less (-)ascomparedwithcolumn-3

ascomparedwithcolumn-5

1 2 3 4 5 6 7

Note-

The periods have been shown in the proforma for the

purpose of Illustration only.


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The "Proportionate Budget Allotment" to the

end of the month (column 3) is worked out by the AccountsOfficer in accordance with the Instructions contained in

above. The Accounts Officer should complete the othercolumns of the review provided above and submit it to thecontrolling authority, along With the comments of theexecutive officers responsible for the expenditure and withsuch remarks of his own as may be necessary.

In compiling this review, the Accounts Officer shouldsee whether-

(a) The non-fluctuating expenditure is in

accordance with the monthly appropriation as worked out on

the basis of actual in past years,

(b) The periodical expenditure is in accordance withthe proportionate budget allotment,

(c) The correlation assumed between receipts andexpenditure, in the preparation of the budget is maintained.For the purposes of this comparison, items pertaining tothe

period, but remaining unadjusted for any reason, should notbe lost sight of.

The Monthly Financial Reviews, should beprepared by the Divisional/Workshop /Construction Accountsofficers concerned for each Division/Workshop/ConstructionUnit and the Financial Adviser and Chief Accounts Officershould arrange for the consolidation of these reviews into

the Monthly Financial Review for the railway, the details ofprocedure and the due dates being prescribed inconsultation with the railway administration.

Re-appropriations:


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No liability, for which a provision does not existor the provision for which is inadequate in the allotmentsanctioned by the General Manager, should be incurredunless the necessary funds can be obtained either by re-

appropriation or fresh allotment.Such liabilities may, however, be liquidated

provisionally, if otherwise in order, on the spending authorityundertaking to find the requisite funds. All such expenditureshould, however, be held by the Account Officer underobjection "for want of appropriation " or as-" excess overappropriation."

EXPENDITURE ON ACQUISITION,CO NSTRUCTION AND REPLACEMENT OF

RAILWAY ASSETS

Separate allotments are placed at the disposal ofrailway administrations under each Grant for expenditure onworks chargeable to Capital, Depreciation Reserve Fund,Development Fund, Accident Compensation, Safety andPassenger Amenities fund Open Line Works Revenue. Theseallotments are made in lump sums and their distributionover the various sub-heads and over the works for whichthey are intended are spelt out in the 'Works, Machinery and

Rolling Stock Programmes' which are furnished to therailways along with the Budget orders sanctioning theallotments.

These Programmes also show, in the caseof work costing over Rs. 50,000 each, the total estimatedcost of each work, and the Railway administrations are

Abhi Project 1

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