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INTRODUCTION
Railways continue to be t h e principal mode of transport in India. Much
more than that, it has become a part and parcel of the country’s socio-economic life,
impacting not only i ts culture and socio-economic activities but also largely
influencing our art, history and literature besides unifying the people.
Way back in 1853, wheels rolled on rails on 16th April, where the first
ever railway t r a i n , carrying 400 people in 14 carriages, covered the 21-m i l e
distance between Bombay and Thane in about 75 minutes. The train took off with a
regal 21-gun salute to celebrate the occasion. It started as a system to serve the
colonial interests of the foreign master has developed into the main vehicle for
socio-economic development of a welfare society.
The Indian railways are a government concern as most of the capital
invested on railways has been provided by the government, either by loans raised
by it or from its own surpluses. They are a commercial concern in as much as they
are engaged in manufacturing and in sale of “transport”, thus making profits and
maintaining their own assets and paying dividend to the general revenues on the
capital invested on the railway undertaking.
It has become a part and parcel of the country’s socio-economic life, impacting
not only i ts culture and socio-economic activities but also largely influencing our
art, history and literature besides unifying the people.
. It started as a system to serve the colonial interests of the foreign master
has developed into the main vehicle for socio-economic development of a welfare
society.
1
BUDGET
A statement of estimated annual receipt and expenditure whether, on capital or
revenue account of central government is prepared by the railway board. In other words it can
be said that under (article 112) of constitution of India, the president will call upon a
statement from Railways showing the estimated income and the out-lay amount that has to
cross the Consolidated Fund of India. These statements are known as 'Budget'.
A budget is a detailed plan of operations of some specific future period. It is an
estimate prepared in advance of the period to which it' applies. It acts as a business
barometer as it is a complete programmer of activit ies of the business for the period
covered.
According to Gordon and Shilling law budget may be defined as "a predetermined
detailed plan of action developed and distributed as-a guide to current operations and as a
partial basis for subsequent evaluation of performance."
The Chartered Institute of Management Accountants, London, defines a budget as "a
financial and/ or quantitative statement, prepared prior for a defined period of time, of the
policy to pursued during that period for the purpose of attaining a given objective."
NATURE OF BUDGETARY CONTROL
Budgetary control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances, if any. First of all budgets are prepared and then
actual results are recorded. The comparison of budgeted and actual figures will enable the
management to find out description and take remedial measures at a proper time. The
budgetary control is a continuous process, which helps in planning and co ordination. It
provides a method of control too.
2
According to J.A. Scott, "it is the system of management control and accounting in
which all operations are forecasted and so far as possible planned ahead, and the actual
results compared with forecasted and planned ones."
BUDGET, BUDGETING AND BUDGETARY CONTROL
A budget is a blue print of a plan expressed in quantitative--terms. Budgeting is a
technique for formulating budgets. Budgetary control, on the other hand, refers to the
principles, procedures and practices of achieving given objectives through budgets.
According to Rowland and William have differentiated the three terms as;
"Budget are the individual objectives of a department, etc., where as Budgeting may be
said to be the act of building budgets.' Budgetary control embraces all and in addition
includes the science of planning the budgets to affect an overall management tool for the
business planning and control."
DIFFERENCE BETWEEN BUDGET & BUDGETTARY CONTROL
1. The budget is an act of planning whereas budgetary control is an act of controlling.
2. The budget concerns itself with the future. Budgetary control is
however concerned with the present activities although it is prepared on the basis of
data collected from the past budget. But the activities that the budgetary control
involves are not limited to that budget only. It is also related to the questions as to
how far the budget can effectively utilized in future.
3. The budget fixes the target and budgetary control helps to arrive at that target.
3
NEED OF THE STUDY
The budget control system helps in fixing the goals for the organization as
whole as concerned efforts are made for its achievements. It enables economics in
the enterprises. Budgetary control aims at the maximization of profit of the
enterprises. The working of different departments and sections is properly co-
ordinate. By providing targets to various departments budgetary control provides a tool
for measuring managerial performance
PERIOD OF THE STUDY
The period of the study was five years i.e. from 2004-2009. The resarcher
has analysed the financial year stetments of South central railways
SCOPE OF THE STUDY
Any work without boundaries result in ambiguous end. So this study has been
confined to the Finance Department of South Central Railway, Vijayawada Division.
South Central Railway is one of the Zones of Indian Railways and Vijayawada
Division is one among the six Divisions of South Central Railway. The
information about financing strategies and policies are difficult to collect as the head
office of South Central Railway as well as Railway Board mainly frames them. The
study mainly concentrates on the budgetary aspects of Vijayawada Division.
OBJECTIVES OF THE STUDY
The main objective is to study the effectiveness of Revenue Budget in South
4
Central Railway at Vijayawada Division.
To study the data relating to the actual preparation of Budget and find
the deviations.
To study those areas of budget that are having big deviations between
proposed and actual spending and to come out with effective solution that
helps in reducing the gap between proposed and actual.
To Whom It May Concern: study the reasons for deviations by collecting the
views from employees and others those who are related to budget operations.
To study the present financial position of the Division by making comparative
analysis.
To give suggestions for the betterment of the organization
RESEARCH METHODOLOGYS
Research is an academic activity and as such the term should be used in a
technical sense. According to Chifford woody Research comprises defining and re-
defining problems, formulating Hypothesis or suggested solutions; organizing and
evaluation data, making deduction and reaching conclusion and. At last carefully
testing the conclusions to determine whether they fit the formulating the hypothesis.
Information and data presented in the report is collected from two sources.
They are
1. Primary Sources
2. Secondary Sources
5
Primary Source
The primary data required for the study has been collected by personal
interaction with employee offices and other concerned persons of Finance Division.
Secondary Source
The secondary data has been collected from
1. Annual reports
2. Web sites
3. Company journals
LIMITATIONS OF THE STUDY
The hindrances that came across during the period of my study and which show
their effect on my study are mentioned below as the limitations of the study. Those
are as follows:
1. As railways consist of different zones the budget of one zone is linked with
the budget of another zone, but i have consider only VJA division.
2. Due to the unavailability of current periods data i.e., 2009-10 the present
year performance could not be analyzed.
3. A study on Revenue Budget does not reflect the whole financial position of
the Division.
4. The time available to conduct the study was only 2 months. It being a wide topic
had a limited time.
5. The time available to conduct the study was only 2 months. It being a wide topic
had a limited time
6
INDUSTRY PROFILE
Indian Railways abbreviated as IR, is a Department of Government of India,
under Ministry of Railways and is tasked with operating the rail network in
India. The Ministry is headed by a cabinet rank Railways Minister, whereas, the
department is managed by Railway Board. Indian Railways is NOT a corporate
body, as many people think. However, of late, IR is trying to adopt a corporate
management style.
Indian Railways had, until recently, a monopoly on the country's rail transport.
It is one of the largest and busiest rail networks in the -world, transporting fourteen
million passengers and more than one million tonnes of freight daily. IR is the
world's largest commercial or utility, employer, with more than 1.6 million
employees, and is second only in total terms to the Chinese Army.
The railways traverse through the length and width .of the country; the routes
cover a total length of 63,140 km (39,233 miles). As of 2002, IR owned a total
of 216,717 wagons, 39,263 coaches and 7,739 locomotives and ran a total of
14,444 trains daily, including about 8,702 passenger trains.
Railways were first introduced to India in 1853. By 1947, the year of India’s
Independence, there were forty-two rail systems. In 1951 the systems were
nationalized as one unit, becoming one of the largest networks in the world. Indian
Railways operates both long distance and sub-urban rail systems
Extent of Great Indian Peninsular Railway network in 1870. The GIPR was
one of the largest r a i l companies at that tim
A plan for a rail system in India was first put forward in 1832, but nofurther
stepswere taken for more than a decade. In 1844, the Governor General of India
7
Lord Hardinge allowed private entrepreneurs to set up a rail system in India. Two
new railway companies were created and the East India Company was asked to
assist them. Interest from investors in the UK led to the rapid creation of a rail
system over the next few years. The first train in India became operational on
TS51-12-22, and was used for the hauling of construction.
Material in Roorkee. A year and a half later, on 1853-04-8 6, the first
passenger train service was inaugurated between Bori Bunder, Bombay and Thana.
Covering a distance of 34 km (21 miles), it was hauled by three locomotives, Sahib,
Sindh and Sultan. This was the formal birth of railways in India.
The British government encouraged new railway companies backed by
private investors under a scheme that would guarantee an annual return of l i v e
percent during the initial years of operation. Once established, the company would be
transferred to the government, with the original company retaining operational control.
The route mileage of this network was about 14,500 km (9,000 miles) by 1880,
mostly radiating inward from the three major port cities of Bombay, Madras and
Calcutta. By 1895 , India had started building its own locomotives, and in 1896
sent engineers and locomotives to help build the Uganda Railway.
Soon various independent kingdoms built their own rail systems and the
network spread to the regions that became the modern-day states of Assam,
Rajasthan and Andhra Pradesh. A Railway Board was constituted in 1901, but
decision-making power was retained by the Viceroy, Lord Curzon. The Railway
Board operated under aegis of the Department of Commerce and Industry and had
three members: a government railway official serving as chairman, a railway
manager from England and an agent of one of the company railways. For the first
8
time in its history, the Railways began to make a tidy profit. In 1907, almost all the
rail companies were taken over by the government.
The following year, the first electric locomotive appeared. With the arrival of
the First World War, the railways were used to meet the needs of the British
outside India. By the end of the First World War, the railways had suffered
immensely and were in a poor state. The government took over the management of
the Railways and removed the link between the financing of the Railways and
other governmental revenues in 1920, a practice that continues to date with a
separate railway budget.
The Second World War severely crippled the railways as "trains were diverted
to the Middle East, and the railway workshops were converted into munitions
workshops. At the time of independence in 1947, a large portion of the railways
went to the then newly formed Pakistan. A trial of forty-two separate railway systems,
including thirty-two lines owned by the former Indian princely states, were
amalgamated as a single unit which was christened as the Indian Railways.
The existing rail networks were abandoned in favor of zones in 1951 and a
total of six zones came into being in 1952. As the economy, of India improved, almost
a l l railway production units were indigenized. By 1985, steam locomotives were
phased out in favor of diesel and electric locomotives. The entire railway
reservation system was streamlined with computerization in 1995.
Indian Railways, the premier transport organization of the country is the
largest rail network in Asia and the world's second largest tinder one management.
Indian Railways is a multi-gauge, multi-traction system covering the following.
9
Broad Gauge (1676mm) 83073 km
Meter Gauge (1000mm) 20343 km
Narrow Gauge (61 0 and 762mm) 4027 km
Since then the railways have spread over different corners of India and at the
beginning, the task of railways was entrusted the individual companies. Now all the
major railways are owned and managed by the Govt. of India. Even today there are
some railways, which are managed by some private companies.
"Railway" means a railway or any portion of a railway 'for the public
carriage or passengers or goods and includes.
All land within the fences or other boundary indicating the limits of the land
appurtenant to a railways.
A l l l ines of railway, siding or branches worked over for the purpose of or in
connection with a railway.
All stations, offices, warehouses, workshops, manufactories, fixed plant and
other works constructed for the purpose of, or in connection with railway.
The Indian Railways are one of the largest systems in the world.
It provides the principle mode of transport for fright and passenger's. It has
played a vital role in the Economic, Industrial and social development of our country.
There is no better way to witness India, than to view the changing scenes from a
carriage window of a train. Through British .laid most of the 38525 miles (62000
KMS) of track, if was assumed the end of colonial rule in India, marks the beginning
of travel as you please.
10
OBJECTIVES OF THE STUDY
The corporate management objectives of railway undertaking are as under.
To provide transport for both passengers and goods adequate to meet demand
in areas where railway operation confers optimum benefit to the economy having
due regard to the government's policy of development of back ward areas.
To provide such rail transport at the lowest cost consistent with
Requirements of the railway users and safety of operation
Adequate provision for replacement of assets and son e provisions for
development of business, and
The least amount of pollution of environment.
To work in association with or utilize other needs of transportation, such as
pipe lines and road transport, and to engage in railway
activitiesnecessary to sub serve the above two objectives; and
To establish corporate image of the railways as being an up-to-date business
organization with the interest of .public and of the nation as i t s prime
objectives; and
To develop organizationally effective personnel with pride in their work and
faith in the management.
INNOVATIVE TECHNOLOGIES BY KONKAN RAILWAYS
Konkan Railway Corporation (KRC), the technological marvel of Indian
Railways, has invented quite a few new technologies" Anti Collision device (ACD),
state-of-art indigenous technology of KRC is currently under-going intensive field
trails and is capable of avoiding collision between trains. Sky bus metro is another
11
innovative, economic and eco-friendly mass rapid transportation solution devised
by KRC, which is undergoing trials at present, will help railways run the fastest
train in the near future and will make tracks much more safe and sustainable.
NEW TECHNOLOGIES
India became the first developing country and the 5 th country in the world to
roll out the first indigenously built "state-of-the-art" high horse power three-phase
electric locomotive. When the first such loco was Hugged off from Chittranjan
Locomotive Works (CLW) CLW has been achieving progressive indigenization and
the cost of 'locomotives has come down to the level of Rs.13.65 cr. diesel
locomotives works, Varanasi has produced state-of-the-art 4000HR AC/AC diesel
locomotive in April 2003. These 'locos are capable of handling 4800 tone freight
trains at a speed of 100 KMPII. and can continuously up to 90 days in one
stretch without any major maintenance. Darjeeling Himalayan Railways attained
the world heritage status from UNESCO. Fairy Queen, the oldest functioning steam
engine in the world, which finds place in the Guinness Book of world records, got
heritage award at the International Tourist Bureau, Berlin in March 2000. On
operational front, Delhi Main Station entered the Guinness Book for haying the
world's largest route relay interlocking system.
12
ANNUAL PLAN 2008-09
The Annual plan of 2008-09 is the highest ever annual plan of the
railways. It is proposed to invest Rs.37, 500 cr. Which is 21 percent more than
the previous year? The total budgetary support to be received from general
exchequer is Rs.7874 cr. including Rs.774 cr. to be provided from central road
fund? In this manner internal and external budgetary resources would constitute 79
per cent of the annual -plan. The outlay for doubling works has been increased to
Rs.2, 500 cr. traffic facility works-to Rs.1535 cr. has been proposed for
projects under implementation by RVNL. Provision for Rs.1730 cr. for new
lines, Rs.2489 cr. for gauge conversion, Rs.626 cr. for electrification & Rs.650
cr. for metropolitan transport projects has been made. On safety related plan
heads, provision has been made for Rs.3600 cr. for track renewals. Rs.1,520 cr.
for signal and telecommunication works, Rs.700 cr. for Road under, Bridges
and Rs.600 cr. for manning of unmanned level crossings. Additional funds to the
tune of Rs.1712 cr. have been sought for Ministry of Finance for national projects of
Udaipur-Srinagar Baramulla, Jiribam-Imphal Road, Dimapur-Kohinia, Azra-Bymiliat
and KUmarghat-Agartala new line, Bogibeel Rail-cum-Road Bridge and LUmding-Silchac-
Jiribam, Rangia-Murkongeiek gauge conversion.
ONGOING PROJECTS
During the current year, 2003 km broad gauge lines are likely to be
completed. The target for construction of broad gauge lines in "2008-09 is
3500 km. The construction of new lines between Kakaporc and Bedlam in
Kashmir Valley has already been completed and the remaining portion in the valley will be
completed in 2008-09
13
NEW LINES
155 km of new line is likely to be completed in 2007-08. Bangalore-Hassan has
already been completed, Manu-Ambassa of Kumarghat-Agartala, Mahab-Khajuraho,
Bikramganj-Piro of Ara-Sasaram and Deogarh-Ghormara of Deogarh-Dumka are likely to
be completed soon.
A target of 350 km has been fixed for construction of new lines in 2008-09. Some
prominent sections are as follows:
Ghormara-Kumka of Deogarh-Dumka
Nagapattinam-Velenkanni
Yerraguntla-Nossam of Yerraguntla-Nandyal
Harapanhalli-Harihar
DOUBLING
During 2007-08, doubling of 500 km is expected to be completed while target of
1000 km has been fixed for the year 2008-09.
NEW PROJECTS
I am happy to inform the House that work of gauge conversation of Ratlam-
Indore-Khandwa-Akola, Udaipur-Ahhedabad, Suratpura-Hanumangarh-Sriganganagar, Jaipur-
Ringus-Churu & Sikar-Loharu, Madurai-Bodinayakkanur and new lines Kursela-Bihariganj,
Erode-Palani, Gaya-daltonganj, Chennai-puducheery-cuddalore,muzaffarpur-dardhanga,
Attipattu-puttur and jalalgarh-kishanganj have been included in the budget. The works of
14
panskura-kharagpur, bina-bhopal, Champa-Jharsuguda, Rajkharswan-sini third line, the
state government of Maharashtra has agreed to share cost of manmad-indore and the
proposals would be processed further for necessary approval.
SURVEYS
Based on demands, the foiling surveys are proposed to be taken up:
Washim-Badnera Khandwa-Dhar
Solapur-Jalgon Rotegaon-Puntambu
Rewari-Palwal-Khurja Baddi-Barotiwala-Nangal
Meerut-Panipat Kanjangad-Panathur
Salna-kumtai Dongargarh-Kota
Ellenabad-Sirsa Junagarh-Arnbaguda
GAUGE CONVERSION
Billimora-Waghai with extension up to manmad
Pratapnagar -Jambusar-Kavi
Jhaghadia-Netrang-with extension up to Nandurbai
Mavi -Badi Sadri
New mal-Maynaguri Road
DOULDING
Aunrihar –Varanasi
Lohto –Jhangai
Buxar-Ara-Mokama third line
Dornakal-Manuguru
Omalur -Mcttur Dam
15
BUDGET ESTIMATES 2008-2009
The target for freight loading for the year 2008-09 has been kept, at 850 MT
and for freight output at 550 billion ton km. Budget Estimates for Freight, passenger,
sundry other earnings and other coaching earning have been kept at Rs.52,700 cr.
Rs.21,681 cr,Rs.5,000cr and Rs.2,420 cr. respectively.
Maintaining an overall double digit growth, gross traffic earnings have been
projected as Rs.81,801’cr, reflecting an increase of Rs.9,146-cr. on the current year
The provision for ordinary working expenses for 2008-09 has been kept at
Rs.50,000cr, which is 20 per cent more than the revised estimates for 2007-08.
Provision for depreciation reserve fund has been stepped up to Ks.7,000 cr. and
pension fund to Rs.9,590 cr. I have made an ad hoc provision of nearly Rs.5000
cr. for anticipated recommendations of the 6" pay commission. Thus the total
working expenses will be Rs.66,590 cr. and net revenue Rs.16,423 cr. while
railways cash surplus before dividend is projected at Rs.24,783 cr. the target
operating ratio is 81.4 percent. Dividend payable for 2007-08, is estimated at
Rs.4,636 cr. In the plan outlay for the next year, Rs.20,600 cr. will be
provided from internal sources.
PASSENGERS SERVICES
During the last four years railways had been reduced the fares of second class
by one rupee per passenger for suburban services, two rupees. per passenger for second
class non-suburban services, 20%, reduction in super-fast surcharge levied on second class
super fast mail/express trains, up to 24% in the fares for the AC 1st class and up to 14% in the
fares for AC 2-tier. We have done the magic of generating a surplus of 25,000 cr. despite
reduction in fares. Bowing to the hopes of millions of people.
16
FREIGHT BUSINESS
In the earlier rating regime, freight rates for high value goods were higher than low
value of goods. Now, freight rates are not based on the value of goods but are fixed after
taking into account railways competitiveness and elasticity of demand. Under the new
pricing strategy, surcharge is-levied during peak season and discounts offered during lean
season. As per present policy, peak and non-peak season and discounts offered during lean
seasons have been fixed uniformly for all the commodities. While many
commodities have different peak and non-peak seasons, loading of some commodities
remains the same throughout the year. Therefore in 2008-09, we have decided to modify
this policy as per the prevailing market conditions.
During the last four years, we have rationalized the freight structure' extensively to
make it simple and transparent. Earlier, we had announced that barring some light
commodities, the difference in the highest rates and reduced the freight rates for petrol
and diesel by more than 12% during the last two years by reducing its classification from
class-240 to class-210. Thus, the rationalization of freight tariff has now completed and
barring few light commodities, the difference between the highest and the lowest rates is
not more than two times.
NEW STEPS TOWARDS SAFETY AND SECURITY
Safety of 13 million passengers that Indian Railway serves every day is of
paramount importance to the system. Over the years, apart from the regular safety
norms followed, the network has taken a number of steps' through innovative use of
technology and stepped up training to its manpower to enhance safety standards. A
17
number of distressed bridges, old tracks, signaling system and other safety
enhancement devices will be replaced during this period. As far as budget
allocation for safety is concerned, Rsl400 cr. was allocated in the revised estimate
for the year. 2001-02, and Rs2210 cr. for the year 2002-03. Extensive field trials of the
Anti-collision Devise (ACD) indigenously developed by Konan Railway Is-going on and
once developed across the zonal railways, this innovative technology will help
railways reduce accidents due to collision between trains.
Security of railway passengers is at present a shared responsibility of the
Railway Protection Force (RPF) and Govt. Reserve Police (GRP). Efforts are on to
amend the Railway act to give more powers to the RPF in ensuring security of passengers
on trains and within railway premises.
WORKING OF RAILWAYS
The existing enactment regulating the construction and operation of
railways in India are the Indian train's ways of 1886 and the Indian railways act of
l99O as amended from time to time. According to the provisions of these
enactments, the executive authority in connection with the administration of
railways vests- i n the central government..
ADMINISTRATION
The ministry of Railways is responsible for management and running of
Railways. All the functions and powers of the central government under certain
sections of the Indian railways act are however delegated to the railway board
under section 2- of the Indian Railway Board Act of 1905.
18
The Railway Board is to function as a corporate body and as a corporate is
responsible to advice the minister on all major questions of Railway policy. The
Railway board is the supreme authority for. day-to-day, administration of the
railways and consists of a chairman, a financial commissioner and four members—
member of staff, member of engineering, and member of mechanical and member of
transportation. The secretary, ministry of transportation also a member of the
board exofficio. The chairman of the railway board has the status of a principal
secretary to the Govt. of India. For the administrative purpose, Indian govt. railways
arc geographically divided into nine zones, each under a general manager who
exercises supervisory control over all the departments and also co-ordinates their
working.
IMPROVING FINANCIAL HEALTH
The financial position of Indian Railways has been slowly but steadily
improving some of the highlights of the financial performance during'2001- 02
include: improved operating ratio from 98.8% to 96.6%, savings in ordinary
wording expenses of Rsl487 cr. Depreciable Reserve Fund (DRF) balance goes up
from Rs78.04 cr. during March last year to Rs632.99 cr. during same time this year.
Railways have established a new milestone in incremental freight loading during
duly this year by carrying 5.70 million tones of goods. Freight loading for the last
financial year crossed the target and attained 492.31 million tones.
19
TIE-UP WITH FOREIGN RAILWAYS
Indian railways is in constant touch with Railways across the world to bring in
state-of-art facilities in its system towards this, a memorandum of understanding was
signed during the Eight Session of the Indo-Austria joint economic commission held
in Vienna. This seeks to promote and deepen long-term infrastructure-specific
cooperation between Indian and. Austrian railways to their mutual benefit. Indian
Railways in New Delhi in which hundreds of delegates from various industries
and Railways around the world participated organized a three-day International
conference of Union of Railways.
SOCIAL OBLIGATIONS AND CARE FOR WEAKER SECTIONS
Senior citizens, Students, Disabled persons etc., enjoy concessional
benefits from Railways. New initiatives in this Area during the last three years
include reduction of age limits for special concession to senior women citizen
from 65 to 60 years, blind and mentally challenged persons can now travel in
AC classes on concessional rates. A free second-class monthly season ticket
(MST’s) for school going children up to tenth standard for travel between
homes to school was also introduced.
20
MAP
A schematic map of the Indian Railway network.
For administrative purposes, Indian Railways is divided into sixteen
zones.
TABLE
ZONES FOR INDIAN RAILWAYS
No. Name Abbr. Head Quarters Date Established
1. Northern Railway NR Delhi April 14; 1952
2. North Eastern Railway NER Gorakapur 1952
3. Northeast Frontier Railway NFR Milligan
(Guwahati)
1958
4. Eastern Railway ER Kolkata April, 1952
5. South Eastern Railway SER Kolkata 1955
6. South Central Railway SCR Secunderabad October 2, 1966
7. Southern Railway SR Chennai April 14, 1951
8. Central Railway CR Mumbai November 5, 1951
9. Western Railway WR Mumbai November 5, 1951
10. South Western Railway SWR Hubli April 1, 2003
11. North Western Railway NWR Jaipur October 1, 2002
12. West Central Railway WCR Jabalpur April 1, 2003
13. North Central Railway NCR Allahabad April 1, 2003
14. South East Central Railway SECR Bilaspur, CG April 1, 2003
15. East Coast Railway ECOR Bhavaneshwar April 1, 2003
16. East Central Railway ECR Hajipur October 1, 2002
21
17. Konkan Railway KR Navi Mumbai January 26, 1998
Konkan Railway (KR) is constituted as a separately incorporated railway, with its
headquarters at Belapur CBD (Navi Mumbai). It comes under the control of the Railway
Ministry and the Railway Board.
The Calcutta metro is owned and operated by Indian Railways, but is not a part of
any of the zones. It is administratively considered to have the status of a zonal railway.
Each zonal railway is made up of a certain number of divisions, each having a divisional
head quarters. There are a total of sixty seven divisions.
TABLE
DIVISIONS OF INDIAN RAILWAYS
ZONAL RAILWAY DIVISIONS
Northern Railway Delhi, Ambala, Firozpur, Luck now, Moradabad
North Eastern Railway Izzatnagar, Luck now, Varanasi
Northeast Frontier Railway Alipurduar, Katihar, Lumding, Rangia, Tinsukia
Eastern Railway Howrah, Sealdah, Asansol, Malda
South Eastern Railway Agra, Chakradharpur, Kharagpur, Ranchi
South Central Railway Secunderabad, Hyderabad, Guntakal, Guntur, Nanded,
Vijayawada.
Southern Railway Chennai, Madhurai, Palghat, Tiruchchirapalli,
Trivandru, Salem
Central Railway Mumbai, Bhusawal, Pune, Solapur, Nagpur
Western Railway Mumbai Central, Baroda, Ratlam, Ahmedabad, Rajkot,
Bhavnagar
22
South Western Railway Hubli, Bangalore, Mysore
North Western Railway Jaipur, Ajmer, Bikaner, Jodhpur
West Central Railway Jabalpur, Bhopal, Kota
North Central Railway Allahabad, Agra, Jhansi
South East Central Railway Bilaspur, Raipur, Nagpur
East Coast Railway Khurda Road, Sambalpur, Visakhapatnam
East Central Railway Danapur, Dhanbad, Mughalsarai, Samastipur, Sonpur
Indian Railways operates 8,702 passenger trains and transports around five billion
annually across twenty six states and three union territories (Delhi, Puducherry (Formerly
Pondicherry) and Chandigarh). Sikkim and Meghalaya are only states not connected.
The passenger division is the most preferred from of long distance transport in
most of the country.
A standard passenger train consists of eighteen coaches, but some popular trains
can have up to 24 coaches. Coaches are designed to accommodate anywhere from 18 to 72
passengers, but may actually accommodate many more during the holiday seasons and on
busy routes. The coaches in use are vestibules, but some of these may be dummied on
some trains for operational reasons. Freight trains use a large variety of wagons.
Each coach has different accommodation class; the most popular being the
sleeper class, 'Up to nine of these type coaches are usually coupled. Air conditioned coaches
are also attached, and a standard train may have between three and five air-conditioned
coaches. Online passenger ticketing, introduced in 2004, is expected to top 100,000 per
day by 2009, while ATMs in many stations will be equipped to dispense long-distance
tickets by the end of 2007.
23
PRODUCTION SERVICES
The Indian Railways manufactures a lot of its Tolling stock and heavy engineering
components. This is largely due lo historical reasons. As with most developing
economies, the main reason is import substitution of expensive technology related
products. This was relevant when the general state of the national engineering industry was
immature.
Production Units, the manufacturing plants of the Indian Railways, are managed directly by
the ministry. The General Managers of the PUs report to the Railway Board. The
Production Units are:
Diesel Locomotive Works, Varanasi
Chittaranjan Locomotive Works, Chittaranjan
Diesel-Loco Modernizations Works, patiala
Integral Coach Factory, Chennai
Rail Coach Factory, Kapurthala
Wheel & Axle Plant, Bangalore
SUB-URBAN RAIL
Many cities have their own dedicated suburban networks to cater to commuters.
Currently, suburban networks operate in Mumbai (Bombay), Chennai (Madras), Kolkata
(Calcutta), Delhi, Hyderabad and Pune, Hyderabad, and Pune do not have dedicated
suburban tracks but share the tracks with king distance trains. New Delhi, Chennai and
Kolkata have their own metro networks, namely the New Delhi Metro, the Chennai
MRTS-Mass Rapid Transport System, same as other local EMU suburban service as in
24
Mumbai and Kolkata etc., but with dedicated tracks mostly laid on a flyover and the
Kolkata Metro, respectively
Suburban trains that handle commuter traffic are mostly electric multiple units.
They usually have nine coaches or sometimes twelve to handle rush hour traffic (Chennai
MRTS has three or six coach formation,-Hyderabad MMTS; abbreviation for Multi
Modal Transport System has mostly six coach train with a single nine coach one). One
unit of an EMU train consists of one power car and two general coaches. Thus a nine
coach EMU is made up of three units having one power car at each end and one at the
middle. The rakes in Mumbai run on direct current, while those elsewhere use
alternating current. A standard coach-is designed to accommodate 96 seated passengers, but
the actual number of passengers can easily double or triple with standees during rush
hour. The Kolkata metro has the administrative status of a zonal railway, though it
does not come under the seventeen railway zones.
The Suburban trains in Mumbai handle more rush then any other suburban
network in India. The network has three lines via, western, central and harbor. It's
considered to be the lifeline on Mumbai. On 11 July 2006 six bombs were set off on these
trains, targeted at the general public
Freight
IR carries a huge variety of goods ranging from mineral ores, fertilizers and
petrochemicals, agricultural produce, iron & steel, multimodal traffic, and others. Ports
25
and major urban areas have their own dedicated freight lines and yards. Many important
freight stops have dedicated platforms and independent lines.
Indian Railways makes 70% of its revenues and most of its profits from the
freight sector, and uses these profits to cross-subsidies the loss-making passenger sector.
However, competition from trucks which offer cheaper rates has seen a decrease in freight
traffic in recent years. Since the 1990s, Indian Railways has switched from small
consignments to larger container movement which has helped speed up its operations. Most
of its freight earnings come from such rakes carrying bulk goods such as coal, cement,
food grains and iron ore.
Indian Railways also transports vehicles over long distances. Trucks that carry
goods to a particular location are hauled back by trains saving the fresh food and
vegetables. Recently Indian Railways introduced the special 'Container Rajdhani' or
CONRAJ, for high priority freight. The highest speed notched up for a freight train is
100 km/h (62 mph) for a 4,700 metric ton load.
Recent changes have sought to boost the earnings from freight. A privatization
scheme was introduced recently to improve the performance of freight trains. Companies
are being allowed to run their own container trains. The first length of an 11,000km freight
corridor linking India's biggest cities has recently been approved. The railways have
increased load, limits for the system's 220,000 freight wagons by 11%, legalizing
something that was already happening. Due to increase in manufacturing transport in India
that was augmented by the increase in fuel cost, transportation by rail became advantageous
financially. New measures such as speeding-up the turnaround times have added some 24%
to freight revenues.
26
NOTABLE TRAINS AND ACHIEVEMENTS
The Darjeeling Himalayan Railway is a World Heritage Site, and one of the few
steam engines in operation in India.
The Darjeeling Himalayan Railway, a narrow gauge train with a steam locomotive
is classified as a World Heritage Site by UNESCO. The-route started earlier at Siliguri and
now at New Jalpaiguri in the plains in West Benga] and traverses tea gardens en route to
Darjeeling, a hill station at an elevation of 2,134 meters (7,000 ft). The highest station in
this route is Ghum. The Nilgiri Mountain Railway, in the Nilgiri Hills in southern India, is
also classified as a World Heritage Site by UNESCO.£4] It is also the only rack railway in
India. The Chatrapati Shivaji Terminus (formerly Victoria Terminus) railway station
in Mumbai is another World Heritage Site operated by Indian Railways.
The Palace on Wheels is a specially designed train, lugged by a steam engine, for
promoting tourism in Rajasthan. The Maharashtra government did try and introduce the
Deccan Odyssey along the Konkan route, but it did not enjoy the same success as the Palace
on Wheels. The Samjhauta Express was a train that ran between India and Pakistan.
However, hostilities between the two nations in 2001 saw
the line being closed. It was reopened when the hostilities subsided in 2004. Another
train connecting Khokhrapar (Pakistan) and Munabao (India) is the Thar Express that
restarted operations on February 18, 2006; it was closed down after the 1965 Indo-Pak war.
The Kalka Shimla Railway till recently featured in the Guinness Book of World Records
for offering the steepest rise in altitude in the space of 96 kilometers.
The Lifeline Express is a special train popularly known as' the "Hospital-on-
Wheels" which provides healthcare to the rural areas. This train has a compartment that
27
serves as an operating room, a second one which serves as a storeroom and an additional
two that serve as a patient ward. The train travels around the country, staying at a
location for about two months before moving elsewhere.
Among the famous locomotives, the Fairy Queen is the oldest running locomotive in
the world today, though the distinction of the oldest surviving locomotive belongs to John
Bull. Kharagpur railway station also has. the, distinction ol' being the world's longest
railway platform at 1Q72 in (3,517 ft). The Ghum station along the Darjeeling Toy
Train route is the second highest railway station in the world to be reached by a
steam loco motive.[6] Indian Railways operates 7,566 locomotives; 37,840 Coaching
vehicles and 222,147 freight wagons. There are a total of 6,853 stations; 300 yards; 2,300
goods-sheds; 700 repair shops and a total workforce of 1.54 million.(7]
ORGANISATIONAL STRUCTURE
Indian Railways is owned and controlled by the Government of India, via the
Ministry of Railways, but it is not a company. It is a department of the Govt. of India.
The Railway Ministry is currently headed by Mamata Benerji , the Union Minister for
Railways and assisted by two junior Ministers of State for Railways, K.H. Muniyappa and E.
Ahamed, chairman Railway Board, S.M. Sharma, Indian Railways is administered by the
Railway Board, which has six members and a chairman.
Each of the sixteen zones is headed by a General Manager (GM) who reports
directly to the Railway Board. The zones are further divided into divisions under the
control of Divisional Railway Managers (DRM). The divisional officers of engineering,
mechanical, electrical, signal & telecommunication, accounts, personnel, operating,
commercial and safety branches report to the respective Divisional Manager and are lit
charge of operation and maintenance of assets. Further down the hierarchy tree are the
28
Station Masters who control individual stations and the train movement through the track
territory under their stations' administration. In addition to the zones, the six production
units (PUs) are each headed by a General Manager (GM), who also reports directly to the
Railway Board.
In addition to this the Central Organization for Railway Electrification-(CORE),
Metro Railway, Calcutta and construction organization of N F Railway are also
headed by a GM. CORE is located at Allahabad. This organization undertakes
electrification projects of Indian Railway and monitors the progress of various
electrification projects all over the country. Apart from these zones and production units, a
number of Public Sector. Undertakings (PSU) are under the administrative control of the
ministry of railways. These PSU's are:
Dedicated Freight Corridor Corporation of India
Indian Railways Catering and Tourism Corporation
Konkan Railway Corporation
Indian Railway Finance Corporation
Mumbai Rail Vikas Corporation
Railtel Corporation of India - Telecommunication Networks
RITES Ltd. - Consulting Division of Indian Railways
IRCON International Ltd. - Construction Division
Rail Vikas Nigam Limited
Container Corporation Limited
Centre for Railway Information Systems is an autonomous society under Railway
Board, which is responsible for developing the major software required by Indian
Railways for its operations.
29
30
HISTORY OF RAILWAYS
16th April, 1853………….. The Beginning
The first railway on Indian sub-continent ran over a stretch of 21 miles from
Bombay to Thane. The idea of a railway to connect Bombay with Thane, Kalyan and with
the Thal and Bhore Ghats inclines first occurred to Mr. George Clark, the chief engineer of
the Bombay Government, during a visit to Bhandup in 1843.
The formal inauguration ceremony was performed on 16th April 1853; When 14
railway carriage carrying about 400 guests left Bori Bunder at 3:30 pm “amidst the loud
applause of a vast multitude and to the salute of 21 guns”.
The first passenger train steamed out of Howrah station destined for Hoogly a
distance of 24 miles, on 15th August, opened to public traffic, inaugurating the beginning
of railway transport on the Eastern side of the sub-continent.
In south the first line was opened on 1st July, 1856 by the Madras Railway
company. It ran between veyasarpandy and Walajah road (Arcot), a distance of 63 miles.
In the north a length of 119 miles of line was laid from Allahabad to Kanpur on 3rd march
1959. The first section from Hathras Road to Mathura Cantonment was opened to traffic
on 19th October, 1875. These were the small beginnings which is due course developed
into a network of railway lines all over the country. By 1880 the Indian Railway system
had a route mileage of about 900
31
COMPANY PROFILE
INDIAN RAILWAYS, the premier transport organization of the country is the
largest rail network in Asia and the world’s second largest under one management
INDIAN RAILWAYS RUNS AROUND 11,000 TRAINS EVERYDAY, OF WHICH
7,000 ARE PASSENGER TRAINS
Indian Railways is a multi-gauge, multi-traction system covering the following:
TRACK KILOMETERS
Broad Gauge (1676mm) -- 86,526
Meter Gauge (1000mm) -- 18,529
Narrow Gauge (762/610mm) -- 3,651
Total 108,706
Locomotive -- 7,566
Coaching Vehicles -- 37,840
Freight Wagongs -- 222,147
Stations -- 6,853
Yards -- 300
Good sheds -- 2300
Repairs shops -- 700
Workforce -- 1.54 Millions
32
Indian Railway is one of the biggest Rail road system in the World operated and
maintained under single management. It is both a Government department as well as a
commercial undertaking expected to be run on commercial lines. As a Government
department, Indian Railway is expected to meet the social obligations by carrying the
traffic at subsidized rates and at the same time Indian Railway is expected to achieve
profitability to meet its revenue as well as capital requirements for its operations
maintenance & expansion needs.
The Network of Indian Railway is spread over 63000 routes Km spread into about
7000 stations having a staff formation of 14lakh employees. Indian Railway carries an
estimated passenger Traffic of 5700 millions of passengers in the year 2005-06. It carries a
wide range of commodities over the system to cater to need of industry, thus helping the
economic development of the country. Indian Railway is expected to carry during 2007-08
785 million tons freight Traffic bringing about earnings of Rs.47000 corers and the overall
Gross earnings from passengers, other coaching goods earnings are targeted to touch
Rs.71000 corers in the year 2007-08
The financial viability of Indian Railway is judged by its operating Ratio-a ratio of
total working expenses divided by gross earnings and expressed as percentage. The
operating ratio of Indian Railway during 2007-08 (audited figures) stood at 83.2% & for
2008&09 the operating ratio is budgeted or targeted at 79.6%.
TURNAROUND OF INDIAN RAILWAY
Indian Railways during last 5years had adopted new financial and marketing
strategies its main emphasis was increased volumes, cutting the costs and improve the
financial performance by better utilization of existing resources & assets. The significant
33
feature appreciated Economies, trade & General public was that Indian Railway did not
increase the fares & freights over couple of years but improved it financial performance by
ending up in surplus of Rs.20 thousand corers during the year 2008-2009.
Some of the methods adopted below are as under :
Carry more loads in the existing wagons
Adopt different marketing strategies by inviting public and private partnership,
joint venture etc.
By adopting e-ticketing, leasing of space in private to private parties Outsourcing
of activities like maintenance of stations, catering services that helped in reduced
manpower cost and increase earnings.
Leasing of vacant land for commercial purpose.
Inviting industry to provide wagons at their cost.
Increase in capacity by successive replacement of first class coaches into AC II tier
and AC III tier.
Introduction of Intercity express Trains and adding more coaches to existing trains.
NATIONAL RAIL VIKAS YOJANA
With a view to complete strategically important Projects within a stipulated period
of time, a non-budgetary investment initiative for the development of Railways has been
launched. Under the scheme all the capacity bottlenecks in the critical sections of the
railway network will be removed at an investment of Rs.15, 000 crores over the next five
years. These projects would include:
34
Strengthening of the golden Quadrilateral to run more long-distance mail/express
and freight trains at a higher speed of 100 kmph. Strengthening of rail connectivity
to ports and development of multi-modal corridors to hinterland.
Construction of four mega bridges – two over River Ganga, one over River
Brahmaputra, and one over River Kosi.
Accelerated completion of those projects nearing completion and other important
projects.
History of Vijayawada Division
It was created on 2 October 1966 as the ninth zone of Indian Railways. The six divisions
35
of this railway have a total 5,752 route kilometers of track. Current General Manager of
S.C. Railway is Mr. M. S. Jayant, an officer of IRTS. From the days of steam-hauled
locomotives and wooden plank seats, South Central Railway has come a long way,
modernizing its system with the state of the art high-powered Diesel and Electric
Locomotives, high speed telescopic Passenger Coaches, and higher axle load wagons,
higher capacity track in all important routes, LED based multiple aspect color light
signaling with panel interlocking & solid state interlocking, and digital microwave and
optic fiber cable communication system, ISDN exchanges etc. Over the years, South
Central Railway has attained sufficient transportation output with adequate infrastructure
development and technological upgrading to serve the regions in its jurisdiction. Safe
operation of trains, expansion of network, modern passenger amenities, punctuality of
trains, courteous service and cleanliness in stations and trains remain always the thrust
areas of this Railway. Being a service oriented organization, South Central Railway
provided Computerized Passenger Reservation System at 85 Stations/locations covering
96% of the berths available. In the arena of information dissemination to the rail
customers, it has provided "139" Interactive Voice Response System (IVRS) for
Reservation and train enquiry, National Train Enquiry System (NTES) for real-time
information on movement of trains, Passenger Operated Enquiry Terminals (POET) with
information on availability of accommodation and confirmation and Close Circuit
Television (CCTV) for real time reservation availability status at all important stations in
its system.
36
The Guntur Junction of Guntur Division
For mass movement of freight, S.C. Railway has introduced high horse powered Diesel
and Electric Locomotives and high speed, higher Axle load Box-N-Wagons. Today, South
Central Railway plays a pivotal role as a catalyst for agricultural and industrial
development in the Southern peninsula apart from fostering the growth of trade and
commerce including import/export through ports by connecting sea ports with their hinder
land and inland container depots. Its reliable and comfortable passenger services for long
and short distance travel by introducing many super fast and inter city trains helps
transform the society by catering to their personal, business, educational and tourism
purposes. South Central Railway was formed on 2 October, 1966, by grouping the
Vijayawada and Hubli Divisions of Southern Railway and Secunderabad and Solapur
Division of Central Railway. Jurisdictional adjustments were made in October, 1977, by
merging Guntakal Division of the Southern Railway with South Central Railway and
transferring Solapur Division back to Central Railway. Secunderabad Division was split in
February, 1978 into two Divisions Secunderabad and Hyderabad to facilitate effective
operational and administrative control. On 1 April, 2003, the newly formed Guntur
division and Nanded Division of South Central Railway became operational and Hubli
Division was transferred to the newly formed South Western Railway. Presently, the
South Central Railway has six divisions, namely Secunderabad, Hyderabad, Vijayawada,
37
Guntur, Guntakal and Nanded with 5752 Route km of which 1604 Route km are
electrified. Vijayawada is the largest railway junction in South India and the most
important station of the South Central Railway.
38
BUDGETARY CONTROL
INTRODUCTION
Planning has become the primary function of management these days. Most of the"
planning relates to individual situations and individual proposals. However, this has to
be supplemented and reinforced by over all periodic planning followed by continuous
comparison with the actual performance with the planned performance.
Budgets are nothing but expressions, largely in financial terms, of,
management's plans for operating and managing the enterprise during specific
periods of time. Budgetary control has, therefore, become an essential tool of
management for controlling costs maximizing profits.
MEANING & DEFINITION OF BUDGET & BUDGETARY CONTROL
What is Budget?
A statement of estimated annual receipt and expenditure whether, on capital or
revenue account of central government is prepared by the railway board. In other words it can
be said that under (article 112) of constitution of India, the president will call upon a
statement from Railways showing the estimated income and the out-lay amount that has to
cross the Consolidated Fund of India. These statements are known as 'Budget'.
MEANING OF A BUDGET
A budget is a detailed plan of operations of some specific future period. It is an
estimate prepared in advance of the period to which it' applies. It acts as a business
39
barometer as it is a complete programmer of activit ies of the business for the period
covered.
According to Gordon and Shilling law budget may be defined as "a predetermined
detailed plan of action developed and distributed as-a guide to current operations and as a
partial basis for subsequent evaluation of performance."
The Chartered Institute of Management Accountants, London, defines a budget as "a
financial and/ or quantitative statement, prepared prior for a defined period of time, of the
policy to pursued during that period for the purpose of attaining a given objective."
NATURE OF BUDGETARY CONTROL
Budgetary control is the process of determining various budgeted figures for the
enterprise for the future period and then comparing the budgeted figures with the actual
performance for calculating variances, if any. First of all budgets are prepared and then
actual results are recorded. The comparison of budgeted and actual figures will enable the
management to find out description and take remedial measures at a proper time. The
budgetary control is a continuous process, which helps in planning and co ordination. It
provides a method of control too.
The Chartered Institute of Management. Accountants, London, defines budgetary
control as 'the establishment of budgets relating to the responsibilities of executives to
the requirements of a policy, and the continuous comparison of actual and budgeted
result, either to secure individual action the objective of that policy or to provide a basis
for its revision."
According to J.A. Scott, "it is the system of management control and accounting in
which all operations are forecasted and so far as possible planned ahead, and the actual
40
results compared with forecasted and planned ones."
BUDGET, BUDGETING AND BUDGETARY CONTROL
A budget is a blue print of a plan expressed in quantitative--terms. Budgeting is a
technique for formulating budgets. Budgetary control, on the other hand, refers to the
principles, procedures and practices of achieving given objectives through budgets.
According to Rowland and William have differentiated the three terms as;
"Budget are the individual objectives of a department, etc., where as Budgeting may be
said to be the act of building budgets.' Budgetary control embraces all and in addition
includes the science of planning the budgets to affect an overall management tool for the
business planning and control."
DIFFERENCE BETWEEN BUDGET & BUDGETTARY CONTROL
1. The budget is an act of planning whereas budgetary control is an act of controlling.
2. The budget concerns itself with the future. Budgetary control is
however concerned with the present activities although it is prepared on the basis of
data collected from the past budget. But the activities that the budgetary control
involves are not limited to that budget only. It is also related to the questions as to
how far the budget can effectively utilized in future.
3. The budget fixes the target and budgetary control helps to arrive at that target.
4. The budget fixes the target and budgetary control to determine the variation
between the budget and the actual performance and analyse the reasons for the
variations. They are extremely useful at the time of preparing a revised budget.
5. The actual performance is measured -not by the budget but by the budgetary
control.
41
OBJECTIVES OF BUDGETARY CONTROL
Budgetary control is essential for policy planning and control. It also acts as an
instrument of co-ordination. The main objectives of budgetary control are as follows:
To ensure planning for future by setting up various budgets. The requirements and
expected performance of the enterprise are anticipated.
To co-ordinate the activities at different departments.
To operate various cost centers and departments with efficiency and economy.
Elimination of wastes and increase in profitability.
To anticipate capital expenditures for future.
To centralize the control system.
Correction of deviations from the established standards.
Fixation of responsibility of various individuals in the organization.
CHARACTERISTICS OF BUDGETING
A good budgeting system should involve persons at different levels
while preparing the budgets. The subordinates should not feel any imposition of
them.
There should be a proper fixation of authority and responsibility. The delegation of
authority should be done in a proper way.
The targets of the budgets should be realistic; if the targets are difficult to
be achieved then they will not ensure' the persons concerned.
A good system of accounting is also essential to move the budgetary successful.
The budgeting system should have a whole-hearted support of the top management.
42
The employees should be imparted budgeting education. There should be meetings
and discussions and the targets should be explained to the employees concerned.
A proper reporting system should be introduced; the actual result should be
promptly reported so that performance appraisal is undertaken.
CLASSIFICATION AND TYPES OF BUDGETS
The budgets are usually classified according to their nature. The following are the
types of budgets, which are commonly used.
a) Classification According to Time:
1. Long-term Budgets
2. Short-term Budgets
3. Current Budget
b) Classification of the Basis of Function:
1. Operating Budgets
2. Financial Budgets
3. Master Budgets
c) Classification on the basis of Flexibility:
1. Fixed Budget
2. Flexible Budget
CLASSIFICATION ACCORDING TO TIME
1. Long Term Budgets
The Budgets are prepared to depict long term planning of the business. The period of
43
long term budgets various between five to ten years. The long term planning is done by
the top'-level management and generally it is not known to lower levels of management.
Long-term budgets are prepared for some sectors of the concern such as capital
expenditure, research and development, long-term finances etc. These budgets are useful
for those industries where gestation period is long i.e.,-machinery, electricity, and
organization.
2. Short term Budgets
These budgets are generally for one or two years and are in the form of monetary
terms. The consumer's goods industries-like sugar, cotton, textiles, etc., use short-term
budget.
3. Current Budget
The period of current budget is generally of months and weeks. The budgets relate to
the current activities of the business. According to I.C.W.A. London. "Current budget is a
budget which is established for use over a short period of time and is related to
current conditions".
CLASSIFICATION ON THE BASIS OF FUNCTION
Budgets can be classified on the basis of functions they are meant to perform. Their
number depends upon the size and nature of the business. The following are the usual
functional budgets:
1. Sales Budget
The budget forecasts total sales in terms of quantity, value, items, periods, areas
etc.
44
2. Production Budget
The budget is based on sales budget. It forecasts quantity of production in terms of
items, periods, areas, etc.
3. Cost of Production Budget
The budget forecasts the cost of production. Separate budgets are prepared
for different elements of cost such as direct materials budget, direct labor budget,
factory overheads budget, office over heads budgets, selling and distribution overheads
budget, etc
4. Purchase Budget
The budget forecasts the quantity and value of purchases required for
production. It gives quantity-wise, money-wise and period-wise information about the
materials to be purchased.
5. Personnel Budget
The budget anticipates the quantity of personnel required during a period for
production activity. This may be further split up between direct and indirect personnel
budgets.
6. Research Budget
The budget relates to the research work to be done for improvement in quantity
of the products or research for new products.
7. Capital Expenditure Budget
The budget provides a' guidance regarding the amount of capital that may be
required for procurement of capital assets during the budget period,
8. Cash Budget
The budget is a forecast of cash position by time period for a specific duration of
45
time. It states the estimated amount of cash receipts and cash payments, etc.
9. Master Budget
It is a summary budget incorporating all functional budgets in capsule form. It
interprets different functional budgets and covers within its range the preparation of
projected income statement and balance sheet.
I. OPERATING BUDGET
The budget shows planned operations for the forthcoming period, including
revenues, expenses and related changes in inventory. It covers in its ambit Sales Budget,
Production Budget, Cost of Production Budget, etc. Thus, it is the principal part of Master
Budget of the business.
The operating budget usually consists of
i) Programmed budget and
ii) Responsibility budget
A. PROGRAMMED BUDGET
It consists of expected revenues and costs of various products or projects that are
termed as the major programmers of the firm. Such a budget can be prepared for each
product time or project showing revenues, Costs and the relative profitability of the
various programmers. Programmer budgets*are thus useful in locating areas where efforts
may be required to reduce costs and increase revenues. They are also useful in determining
imbalances and inadequacies in programmers so that corrective action may be taken in
future.
B. RESPONSIBILITY BUDGET
It is a budget, which identifies the revenues and costs, with an individual
46
responsible for their incurrence. Such a budget is an excellent control device since it
identifies with the individual only such revenues and costs which are controllable by him.
The regarding the actual results are collected from different operations and compared with
the budgeted figure to find out whether the individual has what he expected.
CLASSIFICATION OF THE BASIS OF FLEXIBILITY
The fixed budgets are prepared for a given level of activity, the budget is prepared
before the beginning of the financial year, if the financial year starts in January then the
budget will be prepared a month or two earlier i.e. November or December. The charge in
expenditure arising out of the anticipated charges will not be adjusted in the budget. There,
is a difference of about twelve months in the budgeted and actual figures. According to
I.C.W.A. London, "Fixed budget is designed to remain unchanged irrespective of the
level of activity actually attained". Fixed budgets are suitable under static
conditions. If sales, expenses and costs can be forecasted with greater accuracy
then this budget can be advantageously used.
FLEXIBLE BUDGET
A flexible budget consists of a series of budgets for different level of activity.
It therefore, various with the level of activity attained. A flexible budget is prepared
after taking into consideration unforeseen charges in the conditions of the Business.
A flexible budget is defined as a budget, which by recognizing the difference
between fixed, semi fixed and variable cost is designed to change in relation to the
level of activi
47
RECENT DEVELOPMENT IN BUDGETING
Zero-Based Budgeting
Zero-base Budgeting is a view technique designed to revitalize budgeting.
This technique was first used by the U.S. Department of Agriculture in 1961.
Texas Instruments, a multinational company, pioneered is use in the private sector. It
was Peter A. Pyhrr who designed its logical framework in 197O.The technique suggests
that an organization should not only make decision about the proposed new
programmers but it should also, from time to time, review the appropriateness of the
existing programmers. Such review should particularly be done of such responsibility
centers where there is relatively high proportion of discretionary costs.
Performance Budgeting
Performance budgeting involves evaluation of the performance of the organization
in the context of both specific as well as overall objectives of the organization. According
to the National Institute of Bank Management, performance budgeting technique is, "the
process of analyzing, identifying, simplifying and crystallizing specific performance
objectives of a job to be achieved over a period in the framework of organizational
objectives, the purpose and objectives of the job. The technique is characterized by its
specific direction towards the business objectives of the organization."
48
REQUISITION FOR A SUCCESSFUL BUDGETARY CONTROL
SYSTEM
1. Clarifying Objective
The budgets are used to realize objectives of the business. The objectives must be
clearly spelt out so that budgets, are properly, prepared. In the absence of clear goals, the
budgets will also be unrealistic.
2. Proper Delegation of Authority and Responsibility
Budget preparation and control is done at every level of management. Even
though budgets are finalized at top level but involvement of persons from lower, levels
of management are essential for their success. This necessitates proper delegation of
authority and responsibility.
3. Proper Communication System
An effective system of communication is required for a successful' budgetary
control. The flow of information regarding budgets should be quick so that these are
implemented. The upward communication w i l l help in knowing the difficulties in
implementation of budgets.
4. Budget Education
The employees should be properly educated about the benefits at budgetary system.
They should be educated about their "role in the success of this system. The employees may
not take budgetary control only as a control device but it should be used as a tool to
improve their efficiency.
49
5. Participation of all Employees
Budgeting is done by every segment of the business. It will also require the
active participation" and involvement of all employees. In practice the budgets are to be
executed at lower levels of management. Those for whom the budgets are framed should be
actively associated with their preparation and execution. The employees, on the basis of
their past experience, may give more practical and useful suggestions.
6. Flexibility
Flexibility in budgets is required to make them suitable under changed
circumstances - Budgets are prepared for the future, which is always uncertain. Even
though budgets are prepared by considering the future possibilities but still some
occurrences on may necessitate more appropriate and realistic.
7. Motivation
Budgets are to be implemented by human beings. Their successful implementation
will depend upon the interest shown to improve their working so that budgeting is
successful.
ADVANTAGES OF BUDGETARY CONTROL
The budgetary control system helps in fixing the goals for the organization as
whole as concerned efforts are made for its achievements. It enables economies in the
enterprises. Some of the advantages of budgetary' are as follows.
50
Maximization of Profit
The budgetary control aims at the maximization of profits of the enterprise. To
achieve this aim, a proper planning and co-ordination of different functions are
undertaken. There is a proper control over various capital and revenue expenditure. The
resources are put to the best possible use.
Co-ordination
The working of different departments and sections is properly coordinated.
The budget at different departments has a bearing on one another. The co-ordination
of various executives and subordinated is necessary for achieving budgeted targets.
Tool for Measuring Performance
By providing targets to various departments budgetary control provides a tool
for measuring managerial performance. The budgeted targets are compared to actual
results and deviations are determined. The performance of each department is
reported to the top management.
Economy
The planning expenditure will* be systematic and there will be economy is
spending. The finance will fee put to optimum use. The benefits desired for the
concern will ultimately extend to industry and then to national economy.
Corrective Action
51
The management will be able to take corrective measures whenever there is
discrepancy in performance. The deviations will be regularly reported so that
necessary action is taken at the earliest.
Cost Reduction
In the present competitive world budgetary control has a significant
role to play. Every business tries to reduce the cost a production for increasing
sales.
LIMITATIONS OF BUDGETARY CONTROL
The budgetary control system is not a perfect tool. It has its own
limitations, which are as follows:
i. Opposition against the very spirit of budgeting
There will be always active and passive resistance to budgetary control as it
points efficiency or inefficiency of individuals. The opposition is due to human nature- the
tendency to resist change.
ii. Budgeting and changing economy
The preparation of a budget, which gives a realistic position of the firm's affairs
under inflationary pressure and changing government, is very difficult. Thus, the accurate
position of the business cannot estimate.
iii. Time factor
52
Accuracy in budgeting comes through experience. Management must not expect too
much expect too much during the development period.
iv. Not a substitute for management
Budget is only a management tool. It cannot substitute management. Besides that no
budgetary programmer can be successful unless adequate arrangements are made for
supervision and administration.
v. Co-operation required
The success of the budgetary control depends upon willing cooperation and
teamwork. Budget officer must have co-operation from all department managers. These
managers must feel the responsibility for achieving departmental goals laid down in the
budget.
53
BUDGETORY CONTROL IN INDIAN RAILWAYS
INTRODUCTION
Under article 226 of the Constitution of India, a Consolidated Fund is defined as
reservoir to which all the government earnings flow (credited) and from which the
expenditure of government when so authorized by the parliament is made (debited).
Central government is having consolidated fund of India.
Authorized Expenditure (Appropriation Bills)
Under the article 114(1) of Indian constitution, after the budget is voted by the
parliament and appropriations sanctioned by the president, an appropriation bill is passed.
It becomes appropriation act and this act authorizes government to withdraw money from
consolidated fund of India-to the extent sanctioned for incurring expenditure. It should
borne in mind that though the expenditure is voted by the parliament and the appropriation
sanctioned by the president.
EXPENDITURE
The expenditure is divided into two classes viz. voted and charged. Voted
expenditure is that for which the provision of funds is subject to the Vote of Parliament.
Charged expenditure is such class of expenditure for which the president accords
sanction. Two types of control, namely budgetary and financial. Budgetary control is
defined by the Institute of Cost and Management Accountants (C1MA) as:
"The establishment of budgets relating the responsibilities of executives to the
requirements of a policy, and the continuous comparison of actual with budgeted results,
54
either to secure by individual action .the objective of that policy, or to provide a basis for
its revision".
RAIL BUDGET AND FINANCE
The Railway Budget deals with the induction and improvement of existing trains
and routes, the modernization and most importantly the* tariff for freight and passenger
travel. The Parliament discusses the policies and allocations proposed in the budget. The
budget needs to be passed by a simple majority in the LokSabha (India's Lower House).
The comments of the Rajya Sabha (Upper House) are not binding, Indian Hail ways are
subject to the same audit control as other government revenue and expenditures. Based
on the anticipated traffic and the projected tariff, the level of resources required for
railway's capital and revenue expenditure is worked out. While the revenue expenditure is
met entirely by railways itself, .the shortfall in the capital (plan) expenditure is met partly
from borrowings (raised by Indian Railway Finance Corporation) and the rest from
budgetary support from the Central Government. Indian Railways pays dividend to the
Central Government for the capital, invested by the Central Government.
As per the Separation Convention (on the recommendations of the Acworth
Committee), 1924, the Railway Budget is presented to the Parliament by the Union
Railway Minister, two days prior to the General Budget, usually around 26 February.
Though the Railway Budget is separately presented to the Parliament, the figures relating
to the receipt and expenditure of the Railways arc also shown in the General Budget,
since they are a part and parcel of the total receipts and expenditure of the Government
of India. This document serves as a balance sheet of operations of the Railways during the
previous year and lists out plans for expansion for the current year.
55
The formation of policy and overall control of the railways is vested in Railway
Board comprising the Chairman, Financial Commissioner and other functional Members
for Traffic, Engineering, Mechanical, Electrical and Staff matters. As per the 2007
budget, Indian Railways earned Rs,54,600 cr. (Rs.546,000 million or US$12,300
million). Freight earnings increased by 10% from Rs.30,450 cr. (US$7,000 million) in the
previous year. Passenger earnings, other coaching earnings and sundry other earnings
increased by 7%, 19% and 56% respectively over previous year. Its year end fund balance is
expected to stand at Rs.11,280 cr. (2.54 billion US$).[9]
Around 20% of the passenger revenue is earned from the upper class segments of
the passenger segment (the air-conditioned classes). The overall passenger traffic grew 7.5%
in the previous year. In*the first two months of India's fiscal year 2006-07 (April and May),
the Railways registered a 10% growth in passenger traffic, and a 12% in passenger earnings.
The Budgets Estimates are prepared by Railways Administration for the following,
and the figures are shown in thousands of rupees:-
A) Earnings Estimates (Receipts)
B) Revenue Budget (demand Nos. 3 to 14)
C) (C) Capital Budget (demand No. 16);
(i) Works programmer
(ii) Rolling Stock programmed
(iii) Stores Transactions (demand 16, cap. 7100)
(iv) Workshop Manufacturing Suspense
(D) Civil Grants.
56
EARNINGS ESTIMATES
The Estimates for gross receipt should be prepared in thousands of rupees. The chief
Marketing Mangers are responsible for preparation of earnings estimates as they are
being in more touch with trade through marketing and sales organizations and"
responsible for regulating the rates and fares.
The accounts department will furnish all the details that are required by the
commercial branch such as actual earnings subsidiary, details of Coal, General Goods,
Military earnings etc.
The Revised estimates of earnings for the current year and budget Estimates of next
year are submitted at the same time to Railway. Board, consisting of the following break up
of Traffic Earnings under the following heads:
Passenger
Other Coaching
Goods.
Sundries
Suspense (Traffic Accounts).
I. Traffic Earnings
a) Coaching
(i) Passengers
Air conditioned
First Class
Second Class
Total Passenger
57
(b) Goods
Coal
Other than Coal
Total Traffic earnings
II. Sundry other earnings
Total Gross Earnings
III. Suspense
Gross receipts: It includes Passengers, other coaching’s, goods, sundries
suspense-Traffic Account.
Revenue Budget (Demand Nos. 3 to 14)
The Railways Administration viz. spending authorities are required to submit to
railways board, their revised estimate for the current year and the budget estimate for the
next year at the same time in the month of November each year for working expenses,
Demand Nos. 3 to 13 and the figures are shown in thousands of rupees.
Works programmer
Spending authorities' viz. C.E. open line and G.M. are responsible for the
preparation of works budgets estimates in respect of the works chargeable to capital, DRF,
DF, DLWR, and ACF, under Demand No. 16.
Preliminary Works Programmer
The preliminary works programmer is initiated at Divisional/District level
in the month of June/July in respect of each work under each plan head and the works are
58
grouped in two categories, namely, works costing more than Rs.5 lakhs each and works
costing up to Rs.5 lakhs each. The items in the works programmer are grouped under the
following categories:
1. New Works 2.Work-in-Progress
Final Works Programmer
The Railways Board will then present theses estimates' for the railways, as a whole
before the parliament. After the vote of parliament is obtained, the allotments are made
through budget orders" to the various Zonal Railways by the Railways Board.
Rolling Stock Programmer
Like, 'Works programmer', 'Rolling Stock Programmer* is prepared annually at
two stages viz. (i) Preliminary Programmer, and (ii) Final Programmer under Demand No.
16—Assets, Acquisition, construction and replacement. The preliminary programmer is
submitted to the railways board by 15 January each year.
Rolling Stock Programmer for the year is prepared 15 to 18 months before its
commencement, it has necessarily to be based on the rough estimates of the traffic
requirements of a later period and on the condition of rolling stock. Annual Rolling Stock
programmer is a follow up of Five Years Plan formulated for Indian Railways.
PRESENTATION OF RAILWAY BUDGET
RAILWAY BUDGETING PROCEDURE
The Budget is presented to Lok Sabha in two parts, namely, the Railway
Budget pertaining to Railway Finance and the General4 Budget which gives an overall
59
picture of the financial position of the Government of India, excluding the Railways.
The Fiscal Responsibility and Budget Management Act, 2003 and the Fiscal
Responsibility and Budget Management Rules, 2004 made under Section 8 of the Act
have come into force on 5th July, 2004.
Under Rule 4, Central government is required to lay, in the form prescribed under
the said Rule, before both the Houses of Parliament the following Statements along with
the Annual Financial Statement and Demands for Grants:
Medium Term Fiscal Policy Statement
Fiscal Policy Strategy Statement
Macro-Economic Framework Statement
The Finance Minister accordingly laid these statements on the Table of Lok Sabha
in compliance with the above statutory requirement for the first time on 6 July, 2004.
The Budget is presented to Lok Sabha on such day as the President may direct.
Simultaneously, a copy of the respective Budgets is laid on the Table of Rajya Sabha. In
an election year, the Budgets may be presented twice—first to secure a Vote on Account
for a few months and later in full.
DISTRIBUTION OF BUDGET PAPERS
In (he case of the Railway Budget, the sets are distributed to members from the
Publications Counter after the Railway Minister has concluded his speech.
The sets of General Budget arc distributed to members from several Booths in the
Inner and Outer Lobbies arranged according to the Division Numbers of members. In case
Division Numbers have not been allotted, these booths are arranged State-wise. The budget
60
papers are made available to members after the Finance Minister's speech is over, the
Finance Bill has been introduced and the House has adjourned for the day.
DISCUSSION ON THE BUDGET
No discussion on Budget takes place on the day it is presented to the House.
Budgets are discussed in two stages—the General Discussion followed by detailed
discussion and voting on the demands for grants.
APPROPRIATION BILL
After the demands for grants have been passed by the House, a Bill to provide for
the appropriation out of the Consolidated Fund of India of all moneys required meeting the
grants and the expenditure charged -on the Consolidated Fund of India is introduced,
considered and passed. The introduction of such Bill cannot be opposed. The scope of
discussion is limited to matters of public importance or administrative policy implied in
the grants covered by the Bill and which have not already been raised during the discussion
on demands for grants.
The Speaker may require members desiring to take part in the discussion to give
advance intimation of the specific points they intend to raise and may withhold permission
for raising such of the points as in his opinion appear to be repetition of the matters
discussed on a demand for grant. Such advance intimation must be given before 10.00 hours
on the day the Appropriation Bill is to be taken into consideration. No action is taken on
intimations received after 10.00 hours.
No amendment can be proposed to an Appropriation Bill, which will
have the effect of varying the amount or altering the destination of any grant so made or of
varying the amount of any expenditure charged on the Consolidated Fund of India,
61
and the decision of the Speaker as to whether such an amendment is admissible is
final. An amendment to an Appropriation Bill for omission of a demand voted by the
House is out of order.
In other respects, the procedure in respect of an Appropriation Bill is the same
as in respect of other Money Bills.
[The procedure for presentation of the Budget in and its passing by Lok Sabha is
as laid down in articles 112—117 of the Constitution of India, Rules 204—221and
331-E of the Rules of Procedure and Conduct of Business in Lok Sabha and Direction
19-B of Directions by the Speaker.]
By convention the Railway Budget is presented sometime in -the third week of
February at 1200 hours after the Question Hour. The General Budget was presented by
convention, till 1998, on the last working day of February at 5 P.M. This convention was
however, changed in 1999 when the General Budget was presented at 11 A.M. Since then the
General Budget is presented at 11 A.M. on the last working day of February (except in
2000 when it was presented at 2 P.M.).
SUMMARY OF THE DATA COLLECTED
The data collected was the statements of budget with respect to the past 5 years.
The data collected shows the detailed information about the actual expenditure
and earnings of past 5 years.
The data collected also shows the budgeted earnings and expenditure.
The data collected also helps in knowing the deviations between the budgeted and
actual earnings and expenditure.
Not only budgeted and actual the data also throws a light on the overall
62
financial performance of Vijayawada division.
The data was sorted in the form of tables for the purpose of easy understanding.
Even graphical representations were used wherever they are needed.
Not only budget statements various other statements that are linked with budget
statements are also collected to make the study effective.
Reasons for increase or decrease of various aspects in the budget are collected by
personal interaction with the employees of the department.
Demand No Demand Name
03-A General Superintendence and Service
04-B Repairs & Maintenance of permanent way & Works
05-C Repairs & Maintenance of Motive Power
06-D Repairs & Maintenance Carriage and Wagons
07-E Repairs & Maintenance Plant and Equipment
08-F Operating Expenses – Rolling stock and equipment
09-g Operating Expenses-Traffic
10-H Operating Expenses-Fuel
11-J Staff Welfare and Amenities
12-K Miscellaneous Working Expenses
13-L Provident Fund, Pension and other Retirement Benefits
63
DATA ANALYSIS AND INTERPRETATION
TABLE-1
BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR OF
2004-05 (Fig. in thousands of Rs.)
DEMAN
D NO.
DEMAND NAME BG FG ACTUALS
2004-05 2004-05 2004-05
03-A Genl. Supdt. 142060 155996 154351
04-B R & M Way & Wk 742703 876390 885162
05-C R & M R.Stock 335589 365171 367259
06-D R & M M.Power 235496 261391 262413
07-E R & M P&Equip. 359077 373726 369346
08-F Optg. Exp – R.S. 445109 473304 468061
09-G Optg. Exp. – Traffic 673518 682344 692440
10-H Optg. Exp – Fuel 2133933 2254116 2251186
11-J Staff Welfare 247601 291905 300461
12-K Misc. Exp. 236371 200169 193375
13-L Retire. Benefits 1407 1610 2004
TOTAL 5552864 5936122 5946058
64
Bar chat showing budget grant and actual expenditure during the year of
2004-05
0
500000
1000000
1500000
2000000
2500000
Gen
l.R
& M
R &
MR
& M
R &
MO
ptg.
Exp
Opt
g.O
ptg.
Exp
Sta
ffM
isc.
Ret
ire.
03-
04-
05-
06-
07-
08-
09-
10-
11-
12-
13-
BG 2004-05
FG 2004-05
ACTUALS 2004-05
INTERPRETATION
The difference between the budget grant and actual expenditure with percentage and
reasons are as under :
4-B: There is an increase of 19.18% due to increase in casual renewal works.
8-F: There is an increase of 5.15% due to less allotment of B.G towards Staff P.Us of Running
staff.
9-G: There is an increase of 2.81% due to less allotment of B.G towards Staff P.Us of
Operating staff.
11-J: There is an increase of 21.35% due to increase in cost of medicine and referral cases of
Medical Department.
12-K: There is a decrease of -18.20% due to more allotment of B.G and less expenditure
under staff training and less number of exgratia cases.
65
TABLE-2
BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR OF
2005-06
(Fig. in thousands of Rs)
DEMAND
NO.
DEMAND NAME BG FG ACTUALS
2005-06 2005-06 2005-06
03-A Genl. Supdt. 160486 166448 164799
04-B R & M Way & Wk 922118 954309 983013
05-C R & M R.Stock 433830 415457 420620
06-D R & M M.Power 289814 306349 308192
07-E R & M P&Equip. 434290 442573 438779
08-F Optg. Exp – R.S. 487544 588876 588471
09-G Optg. Exp. – Traffic 710343 759601 757020
10-H Optg. Exp – Fuel 2372246 2400830 2388295
11-J Staff Welfare 312830 329185 329752
12-K Misc. Exp. 196241 122781 119788
13-L Retire. Benefits 4234 5612 5570
TOTAL 6323976 6492021 6504299
66
Bar chat showing budget grant and actual expenditure during the year of
2005-06
0
500000
1000000
1500000
2000000
2500000
3000000
03-A 04-B 05-C 06-D 07-E 08-F 09-G 10-H 11-J 12-K 13-L
INTERPRETATION
The difference between the budget grant and actual expenditure with percentage and reasons
are as under :
4-B: There is an increase of 6.60% due to increase in casual renewal works.
8-F: There is an increase of 20.70% due to less allotment of B.G towards Staff P.Us of
Running staff.
9-G: There is an increase of 6.57% due to less allotment of B.G towards Staff P.Us of
Operating staff.
11-J: There is an increase of 5.40% due to increase in cost of medicine and referral cases of
Medical Department.
12-K: There is a decrease of -38.95% due to more allotment of B.G .
67
TABLE-3
BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR
OF 2006-07
(Fig. in thousands of Rs)
DEMAN
D NO.
DEMAND NAME BG FG ACTUALS
2006-07 2006-07 2006-07
03-A Genl. Supdt. 180908 180141 177421
04-B R & M Way & Wk 1016729 1048444 1060952
05-C R & M R.Stock 449016 403945 400805
06-D R & M M.Power 343375 339994 340669
07-E R & M P&Equip. 509683 463215 459421
08-F Optg. Exp – R.S. 577224 565114 560339
09-G Optg. Exp. – Traffic 795981 803727 801941
10-H Optg. Exp – Fuel 2667258 2429774 2346072
11-J Staff Welfare 388496 334282 322566
12-K Misc. Exp. 135480 139192 138298
13-L Retire. Benefits 4400 8507 8592
TOTAL 7068550 6716335 6617076
*** where : BG – Budget Grant, FG – Final Grant
68
Bar chat showing budget grant and actual expenditure during the year
of 2006-07
010000002000000300000040000005000000600000070000008000000
Gen
l.R
& M
R &
MR
& M
R &
MO
ptg.
Exp
Opt
g.O
ptg.
Exp
Sta
ffM
isc.
Ret
ire.
TOTA
L
03-
04-
05-
06-
07-
08-
09-
10-
11-
12-
13-L
BG 2006-07FG 2006-07ACTUALS 2006-07
INTERPRETATION
The difference between the budget grant and actual expenditure with percentage and reasons
are as under :
4-B: There is a decrease of 4.34% due to decrease in contract payments.
5-C: There is a decrease of 10.73% due to decrease in number of locos for POH during the
year under P.U-33.
7-E: There is an increase of 9.86% due to increase in expenditure towards repairs to TT
Machines under PU-28.
11-J: There is an increase of 16.97% due to increase in Quarter repair works under PU-32.
13-L: There is a decrease of 95.27% due to excess B.G allotment and more number of DLI
cases.
69
TABLE-4
BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR
OF 2007-08
(Fig. in thousands of Rs)
DEMAND
NO.
DEMAND NAME BG FG ACTUALS
2007-08 2007-08 2007-08
03-A Genl. Supdt. 202975 193218 193218
04-B R & M Way & Wk 998218 1065946 1065946
05-C R & M R.Stock 508958 404012 404012
06-D R & M M.Power 406556 356441 356441
07-E R & M P&Equip. 541221 490755 490755
08-F Optg. Exp – R.S. 627574 610211 610211
09-G Optg. Exp. – Traffic 937155 846293 846293
10-H Optg. Exp – Fuel 2731629 2470204 2470204
11-J Staff Welfare 373267 348690 348690
12-K Misc. Exp. 179278 158182 158182
13-L Retire. Benefits 9067 15501 15501
TOTAL 7515898 6959453 6959453
*** where : BG – Budget Grant, FG – Final Grant
Bar chat showing budget grant and actual expenditure during the year
70
of 2006-07
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
Gen
l.R
& M
R &
MR
& M
R &
MO
ptg.
Exp
Opt
g.O
ptg.
Exp
Sta
ffM
isc.
Ret
ire.
TOTA
L
03-
04-
05-
06-
07-
08-
09-
10-
11-
12-
13-L
BG 2007-08
FG 2007-08
ACTUALS 2007-08
INTERPRETATION
The difference between the budget grant and actual expenditure with percentage and reasons
are as under :
5-C: There is an increase of 20.61% due to increase in number of locos for POH during the
year under P.U-33.
6-D: There is an increase of 12.32% due to increase in repairs to Wagons.
7-E: There is an increase of 9.32% due to increase in expenditure towards repairs to TT
Machines under PU-28.
9-G: There is an increase of 9.69% due to increase in TA to Operating staff.
10-H: There is an increase of 9.57% due to increase in excess consumption of Electricity for
Traction power under PU-32.
TABLE-5
71
BUDGET AND ACTUAL EXPENDITURE DURING THE YEAR 2008-09
(Fig. in thousands of Rs)
DEMAND
NO.
DEMAND NAME BG FG ACTUALS
2008-09 2008-09 2008-09
03-A Genl. Supdt. 198515 298945 300417
04-B R & M Way & Wk 1133627 1454904 1450844
05-C R & M R.Stock 494971 538723 544649
06-D R & M M.Power 402643 517032 506826
07-E R & M P&Equip. 516646 737355 750622
08-F Optg. Exp – R.S. 653873 867823 867285
09-G Optg. Exp. – Traffic 865593 1333971 1339401
10-H Optg. Exp – Fuel 2461310 2593646 2529070
11-J Staff Welfare 375655 531686 510931
12-K Misc. Exp. 189332 265259 240721
13-L Retire. Benefits 13318 28702 28526
TOTAL 7305483 9168048 9069292
Bar chat showing budget grant and actual expenditure during the year
72
of 2006-07
0
500000
1000000
1500000
2000000
2500000
3000000
03-A
04-B
05-C
06-D
07-E
08-F
09-G
10-H
11-J
12-K
13-L
BG 2008-09
FG 2008-09
ACTUALS 2008-09
INTERPRETATION
The difference between the budget grant and actual expenditure with percentage and reasons
are as under :
There is a overall increase of 24% between budget grant and actual expenditure which is
mainly due to payment of 6th pay commission arrears having impact on all most all the
demands except 10H and 13L.
6-D: There is an increase of 26%. This is due to POH of more number of wagons besides PC
arrears.
7-E: There is an increase of 45% which is due to increase in expenditure towards repairs to
TT Machines under PU-28 besides PC arrears.
9-G: There is an increase of 55% which is mainly due to payment of PC arrears increase in
TA to commercial and Operating staff.
TABLE-6
73
THE OVERALL EARNINGS OF THE DIVISION
Financial Performance
(Fig. in crores of Rs.)
Details 2004-05 2005-06 2006-07 2007-08 2008-09
Pass. Earnings 260.98 266.53 305.86 350.18 376.96
Other Coaching 34.97 42.58 40.28 42.25 45.04
Goods 238.89 313.58 426.88 484.25 693.45
Sundries 23.38 9.82 10.98 15.59 16.58
TOTAL 558.22 632.51 784.00 891.80 1132.03
Bar chat showing the overall earnings of the division financial performance
INTERPRETATION
The total earnings of the Division for the year ending 31.03.05 is Rs.558.22 crores, for
the year 31.03.06 is Rs.632.51 Crores, for the year ending 31.03.2007 is Rs.784.00 Crores
and for the year ending 31.03.2008 is Rs.891.80 Crores, for the year ending 31.03.2009 is
Rs.1132.03 Crores. Thus there is increase progressively i.e., 24% in 06-07, 40% in 07-08 and.
TABLE-7
74
PERFORMANCE EFFICIENCY INDEX OF THE DIVISION
(Fig. in crores of Rs.)
Details 2004-05 2005-06 2006-07 2007-08 2008-09
Working Expenses 594.60 650.04 661.70 695.94 906.92
Earnings 558.22 632.51 787.00 891.70 1132.03
P.E.I% 106.51 102.77 84.07 78.05 80.10
Bar chat showing performance efficiency index of the division
0
200
400
600
800
1000
1200
2004-05
2005-06
2006-07
2007-08
2008-09
Working Expenses
EarningsP.E.I%
INTERPRETATION
There is a gradual increase in surplus when compared to the year 2004-05 and 2005-06.
That is to earn Rs.100/- expenditure incurred was Rs.102.77 in 2005-06, Rs.84.07 in 2006-
07, Rs.78.05 in 2007-08 and Rs.80.10 in the year 2008-09.
75
TABLE-8
TARGETED EARNINGS AND ACTUAL EARNINGS
(Fig. in crores of Rs.)
Years
2005-06 2006-07 2007-08 2008-09Particulars 2004-05
Targeted Earnings 556.42 590.17 556.42 650.51 1102.80
Actual Earnings 558.22 632.51 784.00 891.80 1132.03
Bar chat showing targeted earnings and actual earnings
0
200
400
600
800
1000
1200
2004-05
2005-06
2006-07
2007-08
2008-09
Targeted Earnings
Actual Earnings
INTERPRETATION
On a comparison of Targeted Earnings and Actual Earnings it can be seen that there is a
gradual increase in Actual Earnings when compared to the Actual Earnings of the year
2004-05.
76
TABLE-9
PERCENTAGE OF CHANGE IN EXPENDITURE
(Fig. in thousands of Rs)
DEMAND
NO.
AE
2004-05
AE
2005-06
AE
2006-07
AE
2007-08
AE
2008-09
03-A 154351 164799 177421 193218 300417
04-B 885162 983013 1060952 1065946 1450844
05-C 367259 420620 400805 404012 544649
06-D 262413 308192 340669 356441 506826
07-E 369346 438779 459421 490755 750622
08-F 468061 588471 560339 610211 867285
09-G 692440 757020 801941 846293 1339401
10-H 2251186 2388295 2346072 2470204 2529070
11-J 300461 329752 322566 348690 510931
12-K 193375 119788 138298 158182 240721
13-L 2004 5570 8592 15501 28526
5946058 6504299 6617076 6959453 9069292
77
Bar chat showing percentage of change in expenditure
0
500000
1000000
1500000
2000000
2500000
3000000
03-A
04-B
05-C
06-D
07-E
08-F
09-G
10-H
11-J
12-K
13-L
AE 2004-05
AE 2005-06
AE 2006-07
AE 2007-08
AE 2008-09
INTERPRETATION
The miscellaneous working expenses have decreased by 2% when compared to the
previous year 2007-08. The expenditure on provident funds; pensions, have increased
almost 56% in the year 2007-08 when compared to 2006-07 the expenditure on general
superintendent, operating expenses of traffic has increased to 7% in the year 2008-09. The
expenditure on repairs and maintenance of carriages and operating expenses has increased
to 8% in 2007-08. The operating expenses on fuel and expenditure on repairs and
maintenance have increased to 3% in 2008-09.
78
ANALYSIS
There is almost 42% increase in miscellaneous working expenses. The expenditure
on staff welfare increased almost 52% in the year 2008-09 when compared to 2007-08.
The expenditure on general superintendence, operating expense of fuel, operating
expenses of traffic and amenities to staff has increased to 6% in the year 2008-09. The
expenditure on repairs and maintenance of motive power, carriages and wagons, plant and
equipment has increased to 16% 2008-09. The operating expenses on rolling stock have
increased to 28% and repairs and maintenance of permanent way and works have
increased to 11% in 2008-09.
79
TABLE-10
ACTUAL EXPENDITURE FOR THE YEARS OF 2005, 2006, 2007, 2008, 2009
(Fig. in thousands of Rs)
DEMAND
NO.
AE
2004-05
AE
2005-06
AE
2006-07
AE
2007-08
AE
2008-09
03-A 154351 164799 177421 193218 300417
04-B 885162 983013 1060952 1065946 1450844
05-C 367259 420620 400805 404012 544649
06-D 262413 308192 340669 356441 506826
07-E 369346 438779 459421 490755 750622
08-F 468061 588471 560339 610211 867285
09-G 692440 757020 801941 846293 1339401
10-H 2251186 2388295 2346072 2470204 2529070
11-J 300461 329752 322566 348690 510931
12-K 193375 119788 138298 158182 240721
13-L 2004 5570 8592 15501 28526
80
Bar chat showing actual expenditure for the years of 2005, 2006, 2007,
2008, 2009
0
500000
1000000
1500000
2000000
2500000
3000000
03-A
04-B
06-D
08-F
10-H
12-K
AE 2004-05
AE 2005-06AE 2006-07
AE 2007-08AE 2008-09
INTERPRETATION
The earnings of the Division have increased from 4% to 13% in 2006-07 to 2007-
08 respectively. The expenditure of the Division has also increased from 8% to 10%
during the period of the study. The Division has suffered a deficit of 3% during the period
of study. The expenditure on repairs and maintenance on plant and equipment has
increased to 19% in 2007-08. The expenditure on miscellaneous working expenses has
decreased to almost 42% in 2007-08. The operating expenses of the Division have
increased from 1% to 6% during the period of study. Out of the total expenditure of the
firm almost 40% of the expenditure will be spent for the Operating Expenses Fuel.
81
TABLE-11
PERCENTAGE OF CHANGE IN EXPENDITURE
(Fig. in thousands of Rs)
DEMAND NO. AE
2004-05
AE
2005-06
PERCENTAGE
OF CHANGE
03-A 154351 164799 7%
04-B 885162 983013 11%
05-C 367259 420620 15%
06-D 262413 308192 17%
07-E 369346 438779 19%
08-F 468061 588471 26%
09-G 692440 757020 9%
10-H 2251186 2388295 6%
11-J 300461 329752 10%
12-K 193375 119788 -38%
13-L 2004 5570 178%
82
Bar chat showing percentage of change in expenditure
-500000
0
500000
1000000
1500000
2000000
2500000
3000000
AE
AE
PERCENTAGE OFCHANGE
INTERPRETATION
When compared to the previous year 2004-05, the General Superintendence of the
division has increased by 7% in 2005-06, Fuel for by 6%, staff welfare for the year 10%,
miscellaneous working expenses by 38%, retire benefits by 178%, and Operating
expenses Traffic by 9%.
83
TABLE-12
PERCENTAGE OF CHANGE IN EXPENDITURE
(Fig. in thousands of Rs)
DEMAND NO. AE
2005-06
AE
2006-07
PERCENTAGE
OF CHANGE
03-A 164799 177421 7.1%
04-B 983013 1060952 7%
05-C 420620 400805 -5%
06-D 308192 340669 10%
07-E 438779 459421 4%
08-F 588471 560339 -5%
09-G 757020 801941 6%
10-H 2388295 2346072 -2%
11-J 329752 322566 -2%
12-K 119788 138298 13%
13-L 5570 8592 35%
84
Bar chat showing percentage of change in expenditure
-500000
0
500000
1000000
1500000
2000000
2500000
3000000
AE
AE
PERCENTAGEOF CHANGE
INTERPRETATION
When compared to the previous year 2005-06, the General Superintendence of the
division has increased by 7.1% in 2006-07, Fuel by 2% staff welfare for the year 2%,
miscellaneous working expenses by 13%, retire benefits by 35%, and Operating expenses
Traffic by 6%.
85
TABLE-13
PERCENTAGE OF CHANGE IN EXPENDITURE
(Fig. in thousands of Rs)
DEMAND NO. AE
2006-07
AE
2007-08
PERCENTAGE
OF CHANGE
03-A 177421 193218 8%
04-B 1060952 1065946 1%
05-C 400805 404012 1%
06-D 340669 356441 4%
07-E 459421 490755 6%
08-F 560339 610211 8%
09-G 801941 846293 5%
10-H 2346072 2470204 5%
11-J 322566 348690 7%
12-K 138298 158182 13%
13-L 8592 15501 45%
86
Bar chat showing percentage of change in expenditure
0
500000
1000000
1500000
2000000
2500000
3000000
03-A 04-B 05-C 06-D 07-E 08-F 09-G 10-H 11-J 12-K 13-L
INTERPRETATION
When compared to the previous year 2006-07, the General Superintendence of the
division has increased by 8% in 2007-08, Fuel by 7% staff welfare for the year 5%,
miscellaneous working expenses by 13%, retire benefits by 45%, and Operating expenses
Traffic by 5%.
87
TABLE-14
PERCENTAGE OF CHANGE IN EXPENDITURE
(Fig. in thousands of Rs)
DEMAND NO. AG
2007-08
AG
2008-09
PERCENTAGE
OF CHANGE
03-A 193218 300417 36%
04-B 1065946 1450844 27%
05-C 404012 544649 26%
06-D 356441 506826 30%
07-E 490755 750622 35%
08-F 610211 867285 30%
09-G 846293 1339401 37%
10-H 2470204 2529070 2%
11-J 348690 510931 32%
12-K 158182 240721 34%
13-L 15501 28526 46%
88
Bar chat showing percentage of change in expenditure
0
500000
1000000
1500000
2000000
2500000
3000000
03-A 04-B 05-C 06-D 07-E 08-F 09-G 10-H 11-J 12-K 13-L
INTERPRETATION
When compared to the previous year 2007-08, the General Superintendence of the
Division has increased by 36% in 2008-09, Fuel by 32% staff welfare for the year 2%,
miscellaneous working expenses by 34%, retire benefits by 46%, and Operating expenses
Traffic by 37%.
89
TABLE-15
COMPARITIVE ANALYSIS OF EXPENDITURE AND EARNINGS DURING
THE FOLLOWING YEARS
(Fig. in thousands of Rs.)
DETAILS 2004-05 2005-06 2006-07 2007-08 2008-09
EXPENDITURE 5946058 6504299 6617076 6959453 9069292
EARNINGS 5582200 6325100 7870000 8917000 11320300
Bar chat showing comparitive analysis of expenditure and earnings during the
following years
0
2000000
4000000
6000000
8000000
10000000
12000000
1 2 3 4 5
DETAILSEXPENDITUREEARNINGS
INTERPRETATION
On the comparison of performance of the Division for the period from 2004-05 to
2008-09 it can be seen that the Division has improved efficiency from the year 2007-08 to
2008-09 by reducing the expenditure and increasing the earnings under passengers and
goods categories. The Division has suffered losses during the years of 2004-05 to 2005-06
because increasing expenditure and reduction in the earnings.
90
FINDINGS
There is a constant increase in the earnings of the Division during the period of study.
The earnings from passenger services have increased constantly year by year.
There is also an increase in earnings from freight services during the period of
study.
After comparing 07-08 incomes and expenditures, the division is very well improved
in reducing the expenditure and increasing the earnings. This is because of
increase Passenger and Goods services.
The expenditure on repairs and maintenance of the division remain constant for 2
years and increased highly in 2006-07.On other hand the total expenditure slowly
increased over the years.
The gross receipts of the firm have been gradually increasing over the years and
improved well in 2008-09.
Railway board will suggest the spending limits (maximum limit for expenditure)
for each Demand at the time of granting the budget. Division is not supposed to
cross this limit. And Vijayawada Division is almost successful in keeping the
expenditure within
the spending limits.
But the Division suffered losses in the year 06-07. The expenditure is more
than earnings during this period. This is mainly due to the Earnings were low
with the increase in working expenses. But the Division was successful in
increasing the Earnings during the subsequent years.
The year 07-08 is one of the successful years because the Division is able to
recover almost all the losses that are occurred in the previous years i.e. 05-06
91
& 06-07.
There is substantial increase in the expenditure of the Division during the period of
study, where the organization is having high fuel expenditure.
The earnings from passenger services have increased constantly year by year.
There is also an increase in earnings from freight services during the period of study.
The expenditure on repairs and maintenance of the Division remain constant for
2 years and increased highly in 2006-07. On other hand the total expenditure
slowly increased over the years.
The expenditure on staff welfare also rapidly increased year by year.
92
SUGGESTIONS
The organization was not able to increase their sundry earnings over the years. So
necessary steps have to be taken to increase the sundry earnings by implementing
Management techniques and managing the Assets efficiently.
Electrifying the remaining un-electrified tracks helps in increasing the efficiency
by way of speedy transport and in reducing the costs towards HSD oil.
The organization has to take steps to maintain cordial relations with Business
community and Industry to attract more Traffic so as to increase Earnings.
Recruitment of Software personnel in the organization enables reduction in
expenses related to office establishment thereby increase in profits.
93
CONCLUSION
Number of reviews on budget may be reduced so that it helps in reducing
paper work as well as saves man-hours.
The monthly Financial Reviews are conducted to compare the performance
efficiency of the division. The results of these financial reviews are to be best
utilized by identifying areas of unnecessary expenditure so as to cortile the
same.
Electrifying the remaining un-electrified tracks helps in minimizing the
expenditure on fuel, as it is almost 45% of total expenditure.
94
BIBLOGRAPHY
1. R.K. Sharma and Shashi K.Guptha ,Management accounting (principles and
practice).
2. Dr.S.N. Maheswari, Financial managent.
3. Blocher, Chen, Cookins, Lin, Cost Management a Strategic Emphasis, TMH,3/e
2006
4. Colin Drury, Management and Cost Accounting, Thomson-2007
5. Creswell, J. W. Qualitative inquiry and research design: choosing among five
traditions.Sage Publications. (1998).
6. Denzin, N. K., & Lincoln, Y. S. Collecting and interpreting qualitative materials.
(2nd ed.). Sage. pub( 2003).
7. Jain S.P and .Narang K.N, Cost and Management Accounting, Kalyani Publishers,
New Delhi, 2006.
8. James Jiambalvo, Managerial Accounting, John Wiley & Sons, Inc.New
Delhi,2007
9. Gummesson, E. Qualitative methods in management research. (2nd ed.). Sage.
(2000).
10. Manash Gupta, Cost Accounting Principles and Practice, Pearson Education,2006
Web site
www.indinrailways.ac.in
95