COMPfNDI.UM

Of

ARTlCLfS

ON

fINANCf

&

ACCOUNTS

BILLS RECOVERABLE: CONCEPTS AND CHALLENGES the outsidemonth of

period.

HOW THE

Introduction

The write up on Bills recoverablehas been made by Shri Hira Ballabh, Sr DFMBSL. The article covers the items for which billing against outsiders is done,methodof billing,problems facedand also offers some solutions.

Editor.& ;..- . Bills recovehead Dem

(Abstract 'Zand the reRecoverabl

Similarly,the amountwithdrawnwill have to

CONCEPTS:

As the term denotes, Bills Recoverable are the dues recoverable byRailways for services rendered and facilities provided to non-Railway persons orparties. Different type of services or facilities are provided by Railways tooutsiders mainly when they are connected with Railway workings or are insurplus. The services provided range from maintenance, of private or assistedsidings, repair of non-Railway wagons, maintenance of FOB, Level Crossings etc.

Similarly, land or buildings' not in use are let out to outsiders oncommercial consideration for which recoveries are made periodically. Railwayalso deputes staff for carrying out Railway related work for outsiders, on whichstaff charges are raised.

RAISING

Of late, threduction'

3) Way leave facilities for pipe lines, cables etc. to outsiders and other govt.deptt.

4) Installation of personal weighing machines, showcases, display boards,advertisements, neon-signs on stations and other Railway premises. .

5) Electric energy supplied to outsiders and other govt. departments.

6) Licensing of stalls, commercial vending contracts, bookstall etc., in thestation premises.

As per 1138RegiSter of(1139-Al).should be r,issued to arealisation

REALISA~provision sqThe Para sa~correctly mqnot be an~realised and

the parties I. I

should be bl

render all p~items. The jthe executivI

TYPEOF FACILITIES PROVIDED:

The facilities provided to private parties or other Govt. departments,statutory bodies can be categorised under following heads: -

1) Serviceslikemaintenance of sidings owned by outsiders.~

2) Licensing of land or letting out buildings to private parties, govt.department, railway consumer co-operative society, staff union canteensetc.

METHOD i7) Rising of Commercial Staff Charges.

Prior approval of competent authority would be required for gr~ting ofthe facility. Once the facility has been provided a formal agreement is signep with

When the a~

expenditur~

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,'-- . - -' ---

theoutside parties. Bills are raised by Railways against concerned parties in themonthof April and the realisation of which should be ensured in one month'speriod.

HOWTHE ACCOUNTAL IS MAINTAINED.

Billsrecoverable 'is a Suspense balance one part of which is operated under theheadDemands Recoverable. These recoverable form part of the 'Sundry Earnings'(Abstract'Z') of the Railways. These earnings are accrued once the bills are raisedand the realisation of the amount clears the Suspense. Thus, the ' DemandsRecoverable' is debited and 'Abstract Z' is credited once a bill is raised.

Similarly, the 'Cash' is debited and 'Demands Recoverable' is credited oncethe amount billed is realised. Thus, in case the amount billed is to bewithdrawn the provision for deduction to that extent from the sundry earningswillhave to be made from the traffic accounts simultaneously.

1,1

RAISING OF BILLS:

Of late, the realisations under bills recoverable are being watched closely asreduction in suspense and increase in earnings has required primary foc~s.

Asper 1138- AI, bills for recovery will be raised through Form A 1138. Similarly, aRegiSter of Bills Recoverable should be maintained for entry of the bills raised(1139-A1). The bills should be prepared neatly and raised in time. This Registershould be reviewed monthly with a view to see that the bills have been correctlyissued to all parties in time and necessary action is being taken towards therealisation of outstanding bills.

REALISATION OF BILLS RECOVERABLE -Para 1141 AI has very importantprovision so far as pinpointing of responsibilities for the recovery is concerned.The Para says that it will be the duty of Accounts Officer to see that the bills arecorrectly made out and promptly issued to the concerned parties. There shouldnot be any ambiguity in the bill regarding date of payment, amount to berealised and mode of payment. Realisation of bill will have to be pursued withthe parties by Accounts Office. Problem, if any, in reapsation of outstandingshould be brought to the notice of executive. It is the responsibility of executive torender all possible help to Accounts office. Focus should be on old and high valueitems. The Accounts Office should also put up monthly position of outstanding tothe executive head of the unit as well as FA&CAO.

METHOD OF BILLING:

When the amounts recoverable are of fixed nature i.e. a percentage on the actualexpenditure or a fixed amount per annum or otherwise, bills are normally

49

preferred by Accounts department while directly sending copies of the same toconcerned Executive departments for information and necessary action.

However, where the. amount to be claimed has to be worked out on thebasis of actuals, bills are prepared by the concerned Executive department andpreferred through Accounts department. Similarly, when a new siding is openedor facility provide the first bill should be raised by executive through Accountsdepartment

The bills are prepared against the parties concerned in the Form A-1138 fordues payable by them. Rate per annum, period of the bill, nature and particularsof the bill and total outstanding including previous outstanding dues, if any, arementioned in the bill.

To ensure timely preparation and despatch of the bill to the partiesconcerned, Accounts office maintains bills Recoverable Registers (A 1139).Separate folios are set apart in respect of each party for individual facilitiesallowed or services rendered so as to enables a watch on raising of bills andresultant recoveries. All bills are entered in the Register and numbered inconsecutive order. As and when dues are realised suitable remarks under

appropriate column of the register are recorded.

In cases where delay is noticed in settlement of the bills the same should bebrought to the notice of higher authorities and should be pursued with the partiesGOncernedat the appropriate level.,

In Para 1837-E of the Engineering Code, there is a provision for charginginterest on the amount recoverable if the sum is not paid within one month fromthe date on which Railways make a written demand. The rate has been fixed at12% per annum. A clause to this effect is incorporated in all agreements for thesidings and all the facilities. However, this is an enabling and not mandatoryprovision regarding interest on delay in payment. Therefore, objection from auditregarding non-imposition of interest charges, if any, is not considered acceptable.

schools,with thewelfare 0:No. 92/amount 5

Regardingvide letter

chargedThe landor worksh

Teuses likemarket valresorted £1

As per the new guidelines, for the purpose of commercial exploitation, surplusland can given on licensing basis. However, leasing of land would require priorapproval of Railway Board. The instructions issued on the subject are circulatedvideBoard's letter No. 82/W2/LM/18/87 of 29/08/1995.

Policy reg,letter No.the market

land so praof licensin

Railwaysgovemmen1payment 01631-A1 thloffice. Forand outside

COMMERCIAL,EXPLOITATION OF LAND:

License fee should be fixed on the basis of market value Le. arrived by TownPlanning Department, Land Registration Offices, Govt. evaluator or as per theprevailing transaction of CPWD /PWD. Base year for determination of value is1985and 10% increase is added every subsequent years in the month of April. Forthe purpose of licensing the land has been classified into various categories like

50

~ -- ----'-.- .-~-

commercialplots, steel yard, shops and retail oil depot etc. Annual licence fee willbefixed as a percentage on the value of the land.. The highest rate fixed is 20%whichis applicable for shops, retail oil depots etc. and 10% for steel yard, coaldumps, bulk oil installations etc., 7.5% for ordinary commercial plots withstructureand 6% for without structure and so on. A standing Committee of HODscomprisingCE, CCM and FA&CAO has been nominated for fixing of rental valuebased .on the valuation of revenue and other authorities as described above.

Minimum limit has been fixed at Rs. 1000/-. Fresh cases of licensing of plotsconnected with the Railway working would need the approval of GM.Agreements should be entered with the parties for these transactions and thetermination or renewal of the agreement should be done at the end of financialyear.

The Surplus Railway Buildings can be let out to outsiders inCludingschools,welfare organizations, Mandirs, Masjids and Gurudwaras in accordancewith the principles enumerated in Paras 1960-E and 1961-E. For schools andwelfare organizations separate instructions have been issued vide Board's letterNo. 92/LM (L)/21/4 dated 11/05/1992 according to which only a nominalamount should be charged on yearly basis as fixed by the Board.Regarding Mandir, Masjid and Gurudwara, latest instructions issued by boardvide letter No. 2000/LML/22/1 of 31/05/2001 state that a nominal rent may becharged from these institutions with a provision of revision from time to time.The land so rented should be in the Railway colonies and not near stations, yardor workshops.

Temporary licensing of land for a period not exceeding 3 months for theuses like carnivals, circus shows etc., can be granted at the rate of 20% of themarket value of the land. This will require approval of GM. Open auction may beresorted for better value if more than one party is involved.

The rate of licensing of Railway land to Govt. Departments should be 12%of the market value of land.

Policy regarding provision of quarter for GRP staff as laid down vide Board'sletter No. 92/LM (B) 21/41/Policy of 12/10/1993 stipulates that, a rate of 3% ofthe market value of land should be charged from the state govt. annually for theland so provide. This rate should be subject to revision every 10 years. This typeof licensing should be for a period of 30. These quarters will be maintained byRailways and maintenance charges for the same will be raised against stategovernment. Railway reserves the right to acquire the quarters at any time bypayment of depreciated cost of building at the rate of 1/65 per year. As per Para1631-A1 the recovery of rent from outsiders should be watched by the Accountsoffice. For this purpose a register of buildings rented to non-railway departmentsand outsiders should be maintained by accounts office in the Form A.1631.

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Regarding Rent/License fee for Way Leave facilities Railway Board had issuedrevised guidelines vide their letter No. 97/LM(L)24/3 of 10/07/1998. The rates ofway leave facilities vary for various categories and are either in terms of a fixedamount or a percentage of the market value of land to be paid per annum. Theserates shall be subject to revision every five years.

tIiJo

PRIV Al

INTEREST & MAINTENANCE CHARGES OF SIDINGS: Sidings are extensionof railway facilities to premises of customers. Based on nature of association fromRailways, sidings can be categorise as: -

1. Assisted Sidings2. Private Sidings

Whe:private ~instruCtilThese i58 /Wl /~99/TC/Icharges i

account fASSISTED SIDINGS

Assisted Sidings are the sidings provided by Railways for transportation servicesto factory or industrial premises other than a colliery, or any mining area or Govt.Deptt.etc. General principles are laid down for the same in paras1822-E t01842-£.The construction of assisted sidings has now been discontinued (Board's L. No.85/WI/SP / 43 Dt/ 01.12.86). The parties to whom such sidings are provided haveto pay following two types of charges which are payable from the date of theiropening.

1) Interest and Depreciation charges - The siding owners have to pay anInterest and Depreciation charges on the capital cost as per book valueborne by Railway at the time of initial construction of the siding. This willbe at the prevalent rate of dividend payable by Railways to general revenuei.e. 7% since 1993.

1) Te

2) Re

3) Sta00

4) De;

2) Maintenance charges - The portion of siding inside party's premises is tobe maintained by the party concerned from its own resources. Railwayshall maintain the portion of siding within Railway's premises for whichmaintenance charges are payable by the siding owner. The maintenancecharges are payable at the rate of 4.5% of the cost of portion of siding borneby Railways which is they brought to the present day cost.

As peJ22.04.92 tI-

the responmaintain

inspectioru

LIBERALI

The maintenance work inside the premises of sidings is their ownresponsibility. However, Railway may take the maintenance of sidingbeyond Railway limit if so desired by the siding owner. Railways shallcarry out periodical inspection of the maintenance carried out by theparty.

As aJfewdt

3) Inspection charges - As stated above where party is maintaining thesiding, periodical inspections are carried out by Railways to ensure that

1) As a s(CTP~throu~sidingnodal I

2) Civil ]

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-- ~ -

safety parameters are being followed properly. Inspection charges leviedby the Railways shall be not less than Rs. 2,000/- per ETKM p.a. andmaximum being Rs. 5000/- p.a. However, in terms of Board's latestinstructions circulated vide No. 99/TC/FM/26/1 dated 29/09/2000, levyof inspection charges has been withdrawn w.e.f. 29/09/2000.

PRIVATESIDINGS -

Where the cost is fully born by the outside party such sidings are termed asprivate sidings. In terms of Board letter No.58/WI/SA/13 of 13/04/1982 uniforminstruction have been issued for levy of maintenance charges from private sidings.These instructions have further been modified vide Board's letter No.58/W1/SP/45 of 0l/12/1986,No. 85/W1/SP/45 of 20/04/1987 and No.99/TC/FM/26/1 of 29/09/2002. As per the above instructions, maintenancecharges are to be levied for private siding on per kilometre basis, which willaccount for the following factors:

'.

1) Tools & Plant Charges.

2) Replacement of small fittings

- Rs. 200/-

- 3% per year of cost ofnew fittings.

- On the basis of Pay scalesOf Vth Pay Commission.

- 12% now reduced to 5% w.e.f.9/2000 on the total of above3 items.

3) Staff cost Le. Pay & Allowancesof Maintenance Staff.

4) Departmental Charges.

As per Board's. instructions issued vide their letter no. 90/CE-1/SP /38 of22.04.92the maintenance of private siding beyond the Railway limits is primarilythe responsibility of sidings owners. The siding owners should be encouraged tomaintain the siding on their own and Rly. should only carry periodicalinspections.

LIBERALIZATION OF SIDING RULES:

As a move towards customer care, Railway Board.have conveyed followingfew decisions vide their letter No. 99/TC (FM/26/1) dated 29/09/2000.

1) As a single window service to the customer Chief Traffic Planning Manager,(CTPM) has been nominated as a nodal officer for all siding mattersthroughout the construction stage and signing of agreement. As soon as thesiding is handed over for commissioning, CCM (FM) will take over as thenodal officer.

2) Civil Engineering Inspection charges have been withdrawn.

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3) The OHE maintenance cost for existing as well as new sidings will be bornby Railways not the sidings.

4) The capital cost and overhead charges for new sidings are rationalised.5) Staff charges, other than Commercial staff will be borne by Railways. These

instructions also make a provision for review of siding agreement, whichwere issued in 1985.

6) Cost of examination in case of sidings other than POL and C&W cost is to beborne by Railways. The rate of maintenance charges per Km. per year shallbe subject to revision every five years. In the intervening period these will beincrease @10% per year.

2)

MAINTENANCE CHARGES OF ROBs/FOBs AND LEVEL CROSSINGS:

No specific orders from Board are available regarding fixation of rates ofmaintenance charges of ROBs and FOBs. As per standard form of agreement arate of 3% per annum of the entire cost of the bridge has to be levied with aprovision of revision as and when considered necessary. In term of Para 1851-E,level crossing maintenance charges are levied on the basis of actual pay andallowances of establishment required for maintenance of the level crossing.

COST OF COMMERCIAL STAFF DEPUTED TO SIDINGS: -These charges are levied on actual basis for staff deployed to sidings i.e. pay andallowances actually paid to the staff multiplied by number of staff. In addition toactual pay and allowances Railway also charges incidental charges, leave salarycontribution to SRPF and gratuity at a prescribed percentage. All staff charges,except Commercial staff deputed at siding dealing with POL and other hazardouscommodities, should be borne by Railways

CHALLENGES:

As stated above, all the charges leviable on other private parties/Govt. Deptt. areraised by Railways on concerned parties annually and Commercial staff chargesare raised quarterly. All bills must be raised in time and realisation of the billsshould be ensured within the financial year. However, owing to certain problemsthe recoveries lag behind. The type of problems faced can be categorised underfollowing heads.

1) NON-AVAILABILITY OF PROPER RECORDS I AND NON-

EXECUTIONIREVISION OF AGREEMENTS: In cases of plots allotted toprivate/other Govt. parties it has been noticed that plans, maps, area of theplots and all other documents required are not properly maintained inRailway Offices. In the absence of the records, it becomes difficult to putstrong defence to solve the dispute as and when they arise. Similarly,agreements are not executed in a number of cases and in some other casesthough the agreements are executed but the clauses therein are in the old.format having no provision for revision arising out of change in policy.

54

t

3) IfI

4) F11

tIetI

ye:tltl

5). [isdedestarcosicexra1

2) REVISION OF POLICIESIFRESH INSTRUCTIONS WITH

RETROSPECTIVE EFFECT: Fresh arrear bills are raised if policy changestake place with retrospective effect. In most of the cases realization of thesebills give rise to disputes. For example, Board's letter on license fee issuedvide letter No. 82/W2/LM/18/87 of 29/08/1995 resulted in raising ofrevised bills w.e.f. 1985. These instructions could actually be implementedin 1999 only. Thus, the plot rent holders were compelled to pay differencein plot rent for 13/14 years at one stroke at a later date, which obviously

. created disputes. In a number of cases, concerned parties had vacated theplots but still they had to pay difference bills.

Similarly, the parties who have been paying their dues on the basis ofrates calculated earlier were unable to pay heavy billing as a result to therevised instructions on rounding off of the sidings length less than 112Km toIhKm.

'I

Many parties go to court and obtain stay orders in case of disputes asa result outstanding is lying in Railway books. It has also been noticed thatas a result of the changes some parties have stopped making payment ofthere due even at older rate also.

3) LACK OF CLARITY REGARDING THE INSTRUCTIONS: ETKM factor

for levy of maintenance charges often create confusion as it has often beenmisinterpreted by both the parties in their favour.

4) REMITIANCE BY PARTIES REMAINING UNCONNECTED: - In a

n~ber of cases of plot /building rent, vendor license etc., it is noticed thatthe parties pay their bills at stations and the same are remitted to Railwayearnings through station balance sheet. But under Bills Recoverable recordthe same is not accounted for and outstanding dues continue to appear foryears together. In number of cases, bills outstanding figure available withexecutive department and Accounts Department show a major variation, asthe necessary recon~iliations are not carried out. It is therefore necessarythat the records are connected and reconciled periodically.

II

5). DISPUTE IN COMMERCIAL STAFF CHARGES: -The common disputeis that the sanctioned strength of staff is less than actual numbers of staffdeployed. The grading of staff deputed and amount actually billed fordoes not tally as the grades of men on roll and grades of sanctionedstrength are different. Sometimes, revision in rates of NDA, OT, NHAand revision of pay as a result of pay commissions etc., are notcommunicated to siding owners. Overtime paid to staff working on thesidings is also disputed. In most of the cases fault lies with railways asexcess billing is done and no efforts are made to charge the sidings onrational basis. Accounts office should sort out this problems through

55

tripartite meetings between commercial, personnel and Accounts whiletaking the party's point of view into account.

stationsbill ame2000 011

Similar!erroneolwell. J

parties (which v.releasedThereforensured

6). MULTIPLICATION OF AGENCIES INVOLVED IN REALISATION OF

DUES: There is no fixed channel or Agency for realisation of each type ofdues. For Commercial staff charges bills,. there are 4 departments involvedin issue and realisation of bills. For raising of bills in some cases,Accounts Department is the Agency but for realisation of the sameEngineering Department is the nodal agency e.g. for the dues of plotrent, building rent charges for ROB, FOB, Water charges etc., Engineeringdepartment is looking after realisation of dues. However, these problemcan be sorted out if Accounts office plays a role of nodal coordinatingagency.

HOW TO APPROACH THE ISSUE:

Proper and timely communication with the parties at appropriate level is ofparamount importance as far as the realisation of outstanding dues is concerned.It should be ensured that there is no inaccuracy or arithmetical error in thepreparation of bills. Bills must be raised in time and follow-up action should beinitiated. Parties should be convinced with the documentary support that thebills are legitimately due. Wherever there is major disputes, meetings may beconvened after taking prior appointment, at appropriate level. For the disputes oflong standing nature, meetings may be arranged at Sr. Official's level. It shouldbe ensured that proper groundwork is done before going for the meeting.

All the Railway officials should be polite in their conduct with thecustomers since some of the customers like siding owners constitute importantsource of freight earnings. Our main objective is freight and not the othersundry charges. Thus, the issue may be approached on these lines only. Thereare instances when because o.f the disputes related to maintenance and othercharges, the customers has shifted to road transport. Therefore, sucheventualities must be avoided at all cost.

One thing to be kept in mind is that the payments to Railways, being agovernment department, are not of sensitive nature from the perspective of theparty therefore recover are relatively easier.

Similarly, the viewpoints of parties must be appreciated and their other concernsshould be communicated to the executive head of the Railway unit concerned.

In an interesting finding, a review of disputed items on BSLdivision, as conductedon 15/12/2002, showed that in almost all the cases, the fault lied with Railways.The problems were related to unusual delay in raising of the bills, wrongcalculation of charges, improper interpretation of the rules and staff charges beingraised disproportionately etc. For example, sidings of IOC at Gaigaon and Shirud

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'-- . - - -

stations of BSL Division were opened in July 1994 whereas the first maintenancebill amounting to Rs. 1.8 crores could be raised as late as in the month of May~OOOonly. Moreover, there was no siding agreement entered with the party.Similarly, in the case of FCI/MMR an excess bill of Rs. 49.9 lacs was raisederroneously which resulted in dispute and non-payment of remaining charges aswell. However, these disputes were sorted out to the satisfaction of both theparties once the matter was taken up with a proper direction. The payments,which were disputed and were outstanding since inception of these sidings werereleased by IOC and CFI in one go without much effort being made by Railways.Therefore, despite few problems proper recoveries of Railway dues can beensured if little more discipline is brought in the working.

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