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Management for Railway Managers

Purpose: This note has been prepared as handout to participants of Integrated Course. It aims at imparting knowledge of such managerial systems of Railways, which can be useful to them in improving their performance. The material is expected to be covered in 4-6 lectures of one and half-hour's duration each.

1. Introduction

As a part of preparation for the examination for selection as an officer, you must have already read much of what is covered in these notes. This note and accompanying interaction in classes is aimed at bridging any gaps left, and emphasising how to overcome the practical difficulties faced in real life environment.

Management is a MIX of KNOWLEDGE and SKILL. Both of these can be acquired with labour and practice. A touch of rare qualities of LEADERSHIP helps. These evolve from a variety of influences on the individual - from an individual's upbringing environment right from childhood to his own spirit and devotion (some people call it get-up-and-go!). Either way, it is a greatly challenging and satisfying task. There is no single formula applicable to all situations, a Manager has to learn the environment of his operation, understand the peculiarities of any situation and exercise his creativity and judgement to evolve, analyse and select from the options available to/generated by him.

2. A principle for improving performance

This is called the principle of 5Ms. Machine, here, signifies the infrastructure required to perform the job, which includes buildings, lighting, water, electricity, machinery and plant etc. Means indicate the tools, equipments, instruments etc required for carrying out the task. A right man should be adequately educated, trained and motivated. Right Method indicates the right instruction for the person to carry out his work. And, of course, perhaps the most important M, which can be added to it is that of Money, which encompasses all of the above, as it is required for every function.

It is said in Railways, you can do anything, if you have the sanction of competent authority and availability of funds. As a manager, it is our business to know - what are the sources of funds for performing a function related to any of the previous five Ms, and who is the competent authority for sanctioning any desired proposal/work.

This information is contained in some important documents, a copy of which must be possessed by all Railway managers. These are…

(i) Stores …

· Indian Railways Stores Code Vol. I & II.

(ii) Finance …

· Indian Railways Accounts Code Vol. I & II.

· Indian Railways Financial Code Vol. I & II (Appendices).

(iii) General …

· SOPGEN – Schedule of Powers on General matters. (Parts (a) Works Matters, (b) General, (c) Stores Matters, (d) Miscellaneous)

· SOPEST – Schedule of Powers on Establishment Matters (generally in two parts - for Gazetted and Non-gazetted employees).

· Manual of Office Procedures (MOP) (Published by Ministry of Home Affairs, and re-draft by Railway Board).

· Vigilance bulletins – published by all Railways and Railway Board – guide you on common pitfalls and preventive steps you can take/better way of doing things/cross checks you can build in etc.

Buy your own copies and keep it updated. You will be surprised to know that Mechanical Department’s offices are the weakest in this activity! You can buy official copies by taking ADRM’s/CWM’s sanction to purchase books for official use.

(iv) Others

· Compendium of DGS&D rate contracts (Published in January every year). You may like to subscribe to their monthly bulletin, in which new contracts replacing expired ones are brought out. Railway stores officers have greater powers to purchase against these and COS's rate contracts. Website: http://dgsnd.nic.in/.

· Industrial Products Finder (Published every year by a consortium of Indian Manufacturing Industries), more information available at website: http://www.industrialproductsfinder.com/.

3. RIGHT MATERIAL

The material required for carrying out a task can be acquired in many ways in Indian Railways. The factors on which the method of acquiring the right material and right quantity depends on the cost and nature of requirement (i.e. occasional or repeated). The available choices for acquiring material are - Cash Imprest and pay-order purchase, Non-stock indents, and Stock Items. The procurement of stock items is specially organised, and groups of items for different consumers across an entire Railway are clubbed and purchased. Some items (like imported items) are purchased through bulk indents by DLW, Railway Board etc. Brief notes follow.

Cash Imprest: The in-charge of a particular area of activity, say a Diesel shed, a workshop or a shop or section inside the diesel shed/workshop, may possess imprest cash provided he is of SSE rank at least (except in special cases, where even juniors may be allowed - in ER only Officers are allowed). The imprest cash can be sanctioned by DRM in a division and CWM in a workshop, up to Rs. 15,000/-. Cases for imprests of higher value would have to go to HQ for sanction by GM (or AGM on his behalf, if delegated). Multiple accounts of imprest cash may be held by an in-charge when circumstances so justify. A single quotation purchase up to Rs 500/- (Rs. 1000/- for Sr Scale independent in-charge, JA Grade and above) can be made in ER. Detailed powers are available in the Schedule of Powers (called SOP) of the Railway concerned.

Pay order purchase: Officers of JA grade and above (depending on SOP) can purchase items up to Rs 5000/- by following the tendering process. A pay-order is made after the material has been received, inspected and certified satisfactory, and sent to Accounts wing for arranging payment. Limits are different in different Railways (consult your Railway's SOP) and higher for senior officers. Adequate justification for not indenting through Stores Department must be provided for finance concurrence.

Tip - Use ADRM or HOD's purchase powers (which are higher) where required.

Non-stock indent: These can be placed for an item, at most twice in a year, at an interval of six months. If the value of indent is below Rs. 20,000/- (Rs. 40,000/- for DGS&D rate contract items, for which user has to quote rate contract details in the non-stock indent in likely source(s) of supply) the purchase is made by Associate Stores Officer of the unit, however larger value indents have to be sent to HQ for purchase by HQ Stores branch. Indents above Rs 40,000/- have to be vetted by Accounts (they prescribe a check-list which must be carefully completed for convenience in vetting) before being sent to HQ for purchase. However, it is recommended that item costing above Rs 10,000/- and required repeatedly (every year) must invariably be stocked.

It is best to place Headquarter indents in the month of April itself for the whole year, so that the full length of the financial year is available for the HQ Stores branch to procure the item, and chances of the material's delivery in the same year are greater. If an indent crosses across the financial year before its delivery and payment is made, the requisition has to come back to indentor for certification of "Funds availability" in the new financial year. Sensible Accounts officers would agree to vett and certify "Funds availability" on requisitions being sent to HQ in, say February or March, for the next financial year instead of current one. Departmental executive officer can certify funds availability himself, if he is maintaining his own liability registers.

Inadequate or incorrect information in the indent - correct and specific description with drawing and/or BIS specifications as required, likely sources of supply, details of previous purchase if any, correct cost supported by budgetary quotation (especially if first time purchase), approval of competent authority as per extant instructions, specifying inspection clause (by consignee, RDSO or RITES, any certificates of testing required, at manufacturer's premises or otherwise) are some of the noteworthy points of information in an indent. In the paucity of this data, the material supplied may not be as per user’s requirement. It helps to add copies of letters of reports of faulty suppliers to eliminate them during the tendering process.

Tips…

· Assess and place all indents in April (start assessing in Feb; also collect budgetary quotes for items needing vetting) to ensure adequate time during the year for procurement, inspection and payment. If it crosses into next year – funds availability in the new financial year has to be given by indentor again causing delay and sometimes necessitating re-tender.

· To assess…

· list out all items (once each) indented in, say, previous three to five years.

· assess quantities required per year, quantity in hand, quantity in pipeline (likely to materialise).

· prepare a format for all SSEs (or section in-charges) to indicate yearly requirement (after teaching them how to calculate for the whole year, not just lump sum but correct mathematical estimates (later question if usage is very high/low).

· add 0/5/10/15/20 % margin for out-of-course requirement and delay in next indent + delivery.

· add backlog of requirement, if any, as per actual need.

· The assessment should be genuinely based on "life-cycle-cost". A cheaper item is preferable if…

· the cost of purchasing it, with

· cost of replacing (i.e. man-power, tools etc) it, and

· the cost of down-time (i.e. loss in the time for which the asset will be rendered idle due to additional replacements required),

…is less than the cost of the costlier component.

· Any indents of any other shed/workshop for the same item as yours, and already well advanced in the stage of procurement at HQ Stores Branch, are known to you, club your indent with those to speed up procurement for yourself. For example, when you place an indent for “Lube oil drums”, another shed’s same item’s indent may already be tendered by HQ Stores.

· Buy the compendium of DGS&D rate-contracts (about Rs. 300) every year; & subscribe to their monthly bulletin of new tenders. DGS&D rate contracts are available for more than 10000 items.

Stock Items: Items are stocked after a stocking proposal (on proforma prescribed by stores indicating its name, description, proposed PL No., drawing number, likely sources of supply, price per unit, approximate annual consumption, etc) has been concurred by Accounts and recommended by Departmental Officer from HQ. The AAC (Approximate Annual Consumption) of stock items should be carefully determined by assessing the quantity fitted, say, per loco, and the life of the item or the schedule in which it is required to be changed. It should also cater to out-of-course requirements, pre-mature failures etc on a percentage basis (select from a suitable range, for example 0%, 5% or 10% (calculating rate of failure for every item is not feasible). The balance-return or stock-sheet (called by different names in different Railways) for stock items should be used to indicate - supply periodicity or delivery schedule (i.e. quantities to be delivered before such-and-such date(s), especially for items with limited shelf life). This helps in reducing inventory and wastage of material due to expiry on shelf.

It is recommended to club even your non-stock items with neighbouring depots, where they are stocked, and from where collection is not difficult for consumer, as it reduces a lot of recurring paper-work for yourself as well as Stores Department.

Planning for recurring and small value non-recurring material requirements:-

A suggested plan for items…

Annual Cost

If perishable

Non-perishable

<2000

>1 time from imprestOnce from imprest of ASO

(Your Associate Stores Officers has single quotation purchase powers of Rs. 2000/-.)

<5000

Prefer Clubbing with other itemsPrefer clubbing for 2 or more years

<10000

1-2 indents

Once through ASO

<20000

1-2 indents through ASOOnce through ASO

<40000

2 indents through ASOHQ - place full annual demand (in April itself)

>40000

Emergency Qty onlyHQ – place full demand in April itself

Tips…

· Items with recurring requirement and annual consumption value above Rs 10,000/- must definitely be stocked (limits followed by different Railways are different, and, in fact, are much lower than Rs 10,000/-).

· Prefer buying to upper monetary limit (and cater to next year’s partial demand), especially for non-perishable items required in continuity. This saves requirement of repeating indents, and much paper work for stores branch.

· The same rule for purchase through ASO. This will reduce work-load on them and they can give better results/attention to other/all matters.

· AVOID/Minimise repeated purchase.

· Club indents of like parts; make sets (repair kits; overhaul set; etc, e.g. A-9 overhaul kit comprising of …..) clubbing many small items together, required in similar quantities. ASO is able to purchase indents of value upto Rs. 2000/- through single quotation (i.e. direct purchase from his imprest), but for values from Rs. 2000 to Rs. 10000, no supplier is easily willing to give quotations.

Instead of indenting 10 different items for repairs of Torque wrenches, indent a single item = “Torque wrench repair kit comprising of … …”. This will bring the indent value up to a respectable amount; besides all the items can be supplied only by genuine suppliers and middlemen will normally avoid.

Bulk indents and imported items: These items have a unique peculiarity of having a long lead time, sometimes three years. Hence, care should be taken while preparing these indents to the would be requirements three years later (depending on, say, whether holding of locomotives will increase or decrease or are there going to be new types of locomotives added to the fleet and what is the material required for them). Directions from HQ, preferably written, should be taken for preparing such indents - usually, associate accounts office will demand HQ letter before concurring such indents.

Planned purchases (for high value non-recurring requirements) through Machinery & Plant Programme and Rolling Stock Programme (made under Demand 16) are discussed later. These are required to be proposed (in the concerned programme) and after inclusion in the "Pink Book" and grant of funds for procurement/execution of work, they can be indented/executed. Remember that non-recurring requirements of small value (below Rs 1 lakh) can be made in revenue, i.e. through regular non-stock indents.

4. RIGHT MEANS

The means include tools, equipment, measuring instruments, gauges etc. These should be planned according to the number of artisans working, and the various protection equipment, accessories, tools etc needed by them. The procurement of these items should be done keeping in mind the life of these items, and a procurement strategy drawn out to acquire these through Associate Stores Officer, if required annual purchase value of the item is below Rs 40,000/- and can be catered through two non-stock indents. Alternately, a one-time requirement may be procured through HQ Stores branch, if the cost is above Rs 20,000/-. However, if the item is required repeatedly (every year), to a purchase value of Rs 10,000/-, then a stocking proposal should be moved.

In vetting indents meant for purchase by HQ, associate accounts shall require condemnation memo for bulk T&P indents.

Greater effort is required in assessing correctly the items and their quantities needed. The effort for procurement can be guided by the planning suggested above in RIGHT MATERIAL. A thought should also be given to newer equipments and superior technological products becoming available in the market. It is a good idea to visit and send key supervisors to visit technological exhibitions, trade fairs etc held at various places. It is preferable to improve applied technology gradually and continuously, than to leapfrog into very advanced technology leading to "shock effect".

5. RIGHT METHOD

The focus of right method is the issue of right instruction to the person for performing his task(s). Such instructions have to be prepared by a technically competent person, who should also possess very good drafting ability. The preparation of instruction should involve the exercise of asking the following questions -

· who (for whom is the instruction meant),

· why (what problem has been faced, or why this instruction is being issued),

· what (what is the task to be done),

· when (when or in which circumstances is this instruction to be followed),

· where (which is the right place for carrying out this instruction)

· how (how the task is to be done, with step by step instructions to collect the right tools, material, preparation work for the task to be performed, checks to be made, check-sheets or available formats to use, etc).

Testing and improving the communication before it is actually issued or put to use is very helpful in eliminating areas of doubt. Try any one of your letters/instructions (if in Hindi, or even otherwise) on your peon and ask him to explain what he understands by it!

6. RIGHT MACHINE (Infrastructure)

A. The arrangement for right infrastructure requires consideration for: -

· Civil engineering facilities - land, building, roof/shed, pit, platform, water, bathroom, cleaning area, landscaping etc.

· Electrical engineering facilities - lighting, power supply, fan, air-conditioning etc.

· Signal and Telecommunication engineering facilities - telephone, communication, walkie-talkie, etc.

· Mechanical engineering facilities - machines, jib/EOT cranes, jacks, vehicles, platform trucks, forklift trucks, battery trucks etc.

Through the yearly (revenue) budget (Demands 1 to 15 - mainly Demands 4,5,6,7, which are in "Repair and Maintenance" group), the Civil, Electrical, S&T and Mechanical Departments can maintain the existing facilities. Minor modifications or enhancements, not costing too much, can sometimes be accommodated in revenue/yearly budget. They can also be done by placing a work order on other departments, by providing funds out of your own planned budget (utilising Primary Unit (PU) 99 for miscellaneous expenditure, or PU 33 for Miscellaneous Debits/Credits and sometimes permissible in PU 32 for contractual payments too). An inter-departmental work order of above Rs 50,000/- from revenue grants needs prior vetting by accounts.

B. The creation of new or substantial enhancement/modification to existing facilities requires:-

· preparation of detailed proposal by Branch Officer in-charge in association with in-charges of other departments who may be involved, either on administrative instruction by PHOD/HOD/DRM/ADRM through their inspection notes or by his own initiative,

· concurrence by associate accounts (who may sometimes ask for instructions of HQ, say in the form of an inspection note of HOD or a separate letter etc), you can obtain ADRM’s administrative approval with a clause ‘subject to finance concurrence’.

· administrative approval by SAG officer (if not already taken),

· administrative approval by Head of Department in HQ,

· concurrence by HQ Accounts,

· approval by AGM/GM (GM can sanction works upto Rs. 30 lakhs subject to overall limit due to funds available in that year, even out-of-turn works can be sanctioned),

· concurrence by Railway Board Accounts branch (for works above Rs. 30 lakhs),

· approval by concerned Member (MM for M&P or RSP; ME for WP) of Railway Board for inclusion in "Pink Book" (proposals above Rs. 5 crores shall need approval of MR, and usually above Rs. 50 crores by Cabinet of Ministers; varies in different years),

· approval of parliament (along with Railway Budget in February's Budget Session of Parliament every year),

· allocation of funds for the proposal,

· preparation of detailed estimate and its vetting,

· sanction of detailed estimate,

· procurement of item or execution of work (some works are spread over several years, in which case, funds are allotted for the first year according to the proposed requirement by proposer, and in balance years as per requirement proposed every year in progress statements and proposal update).

Powers of DRMs and GMs for sanctioning M&P, RSP, WP subject to overall limit of funds granted for a particular year:

(Rs. per case)

RSP

M&P

WP

DRM

NIL

NIL

10 lakhs

GM

NIL

10 lakhs

30 lakhs

Railway Board, MR and Cabinet of Ministers

Full

Full

Full

Some limitations in granting sanctions areas follows: -

· DRM up to Rs 10 lakhs for WP only (some Railways have not enhanced this from previous Rs 5 lakhs, according to Railway Board's letter); any number of cases; total amount should be limited to the funds granted to DRM in that year in Demand 16 by GM. Such proposals need not go to HQ. SrDEN of the division issues a cyclo-styled/printed book containing all the proposals finally sanctioned by DRM under his powers for the division to be carried out in that year and their costs. This booklet is called the Local Works Programme (LWP) or Divisional Works Programme (DWP) or Petty Works Programme (PWP) booklet of the division.

· GM up to Rs 30 lakhs; any number of cases; total amount should be limited to the funds granted to GM in that year in Demand 16 by Railway Board. Such proposals need not go to Railway Board. Chief Engineer (of civil engineering department) issues a printed book every year, which lists the proposals, sanctioned by the General Manager for the year for the whole Railway along with their costs. This book is called LAW (Locally Approved Works) Book (in Eastern Railway), GM's Zonal Works Programme (ZWP), or other similar name in different Railways.

· Normally, proposals up to Rs 5 crore (any number) can be sanctioned by Members of Railway Board (ME for WP; MM for RSP and M&P), within the funds distributed to the department for that year.

· Proposals up to Rs 50 crores can be sanctioned by Minister of Railways. Proposals more than Rs 50 crores are sanctioned by Cabinet of Ministers, headed by Prime Minister. This limit is altered by PM almost every year.

C. The proposals are divided into following types: -

· Works Programme (WP) - called Divisional Works Programme (DWP) or Petty Works Programme (PWP) or Local Works Programme (LWP) in different Railways at Divisional level, LAW or ZWP at Headquarters level, and Preliminary Works Programme at Railway Board level; it normally includes such works in which civil engineering portion of cost is greater than 50%. It is finalised by Civil Engineering Department, all departments send their proposals to them.

· Machinery and Plant (M&P) Programme - includes such proposals, in which, greater than 50% of the work involved is mechanical in nature, i.e. the cost of machine, plant etc. For example, installation of a Pit-wheel lathe machine, which involves civil engineering portion of digging pit, erection of shed etc, and electrical engineering portion of lighting, power supply etc, both of which are far below the cost of the machine. It is finalised by Mechanical Engineering Department. Though permissible at Divisional and Zonal levels too, mostly the proposals are prepared at Railway Board level only.

· Rolling Stock Programme (RSP) - where the purchase involved is neither civil engineering type for WP, or mechanical engineering type for M&P; mainly it is dedicated to purchase/procurement of locomotives, coaches, wagons etc. Such equipment for the rolling stock, which is required to be purchased on one time need basis (being very costly, can not be accommodated in revenue budget) is also included here. It is finalised by Mechanical Engineering Department. The annual requirements for Production Units which manufacture Rolling Stock is also governed by this programme, such as, DLW, RCF, ICF, WAP, CLW and part of DCW.

D. Primary reason or Account on which proposals may be made:-

· CAPITAL account - abbreviated as CAP; works of enhancement of capacity for Railways, for which money is usually borrowed on a predetermined rate of interest from the Central Government, or other sources.

· CAPITAL FUND - abbreviated as CF; Railways own capital fund to which Railway appropriates some amount of its earning every year.

· DEPRECIATION RESERVE FUND account - abbreviated as DRF; Depreciation Reserve Fund, for replacement of old assets after their prescribed life is over.

· DEVELOPMENT FUND - abbreviated as DF; Development Fund for developmental works. It is further subdivided into:-

DF1 - Development fund for Passenger and other railway user's amenities work.

DF2 - Development fund for Labour Welfare Works.

DF3 - Development fund for non-remunerative works, improvement of operational efficiency.

DF4 - Development fund for safety works.

· SAFETY FUND account - abbreviated as SF; for safety related works.

· OPEN LINE WORKS REVENUE account - abbreviated as OLWR; for such works which are to be carried out on lines already open for traffic and for which provision of funds has to be made in revenue budget (of the same year) itself.

· REVENUE account - other works from revenue budget.

· DEPOSIT AND OTHER WORKS - abbreviated as DPO; for works performed by Railways for other organisations against deposits of amounts by them for such works. For example, repair and maintenance of rolling stock (locomotives, wagons) of Port Trusts, Thermal Power Plants or repair and maintenance of track of Port Trusts, Thermal Power Plants etc.

E. Preparing a proposal:-

The preparation of proposals for new works is ordered by Railway Board/HQ (HOD or PHOD), and then undertaken by the corresponding officer of the executive branch. However, preparation of proposals for enhancement, alteration or modification of existing facilities can be made by the executive officer (SrDME (Diesel), CWM, SrDME(C&W) et al). A narrative justification for the need of the proposal has to be made by the officer. He also has to write to the other departments involved (Civil, Electrical, and sometimes S&T) for a joint survey/examination of the site, explaining the requirements and asking for preparation of preliminary estimates, complete with drawings and specifications etc. These are clubbed and compiled by the executive officer of the department that has proposed the work, and then moved forward.

Administrative approval of ADRM/CWM has to be taken on the proposal before sending it for concurrence by Accounts. Proposals up to Rs 10 lakhs can be sanctioned by DRM (provided he has adequate funds left in Demand 16 for that year), and above that have to be sent to HQ. At HQ, administrative approval of HOD has to be taken first, then concurrence of HQ Accounts. GM can sanction the proposals up to Rs 30 lakhs (provided he has adequate funds left in Demand 16 for that year). Proposals of higher value have to be forwarded to Railway Board for concurrence by Accounts branch and sanction of competent authority.

There are standard formats for preparing Works Proposals, M&P Proposals and RSP proposals. The formats are slightly different for proposing the work/M&P item for different account of proposing the work/item, and minor changes occur from Railway to Railway too.

After receipt of the sanction of competent authority (which is communicated through the booklet/book printed by SrDEN in a division, Chief Engineer in HQ or Pink Book of Railway Board, and also indicates the funds granted for that year - as all the funds may not be granted at once), the executive officer prepares the detailed estimate for the entire work and gets it vetted by Accounts. In this, he indicates the work to be performed first (within the allotted funds).

After vetting by accounts, the executive officer requests the concerned department (Civil, Electrical, S&T) to start the work (or that portion which has to be completed in that year).

F. Important Plan Heads and Primary Units in Demand 16

The Demand 16 is divided into Plan heads (like Minor heads, sub-heads, detailed heads for Demand 01 to 15 of revenue budget) and Primary Units (which are different for Demand 16, though they are same for Demands 01 to 15). The existing plan heads are:-

Plan Head

Purpose

Plan Head

Purpose

11

New Lines (Construction)

36

Other electrical works

12

Purchase of new lines

41

Machinery and Plant Programme

13

Restoration of dismantled lines

42

Workshops including Production Units

14

Gauge conversion

51

Staff Quarters

15

Doubling

52

Amenities for staff

16

Traffic facilities - Yard remodelling and others

53

(i) Passenger Amenities

(ii) Other Railway users amenities.

17

Computerisation

61

Investment in Government Commercial Undertakings - Road Services.

21

Rolling Stock

62

Investment in Government Commercial Undertakings - Public undertakings.

29

Road safety works - level crossings

64

Other Specified works

31

Track renewal

71

Stores suspense

32

Bridge works

72

Manufacturing suspense

33

Signalling and Telecommunication works

73

Miscellaneous advances

34

Taking over of line wires from P&T Dept.

81

Metropolitan Transport Projects.

35

Electrification projects

17, 29 and 81 have been added recently. Railway Board as per arising need may add new Plan Heads.

The general way of writing allocation unit for Demand 16 is ABC 16-4100-XX, where ABC represents the three character code of allocation (e.g. CAP, DRF ACF etc),16 represents the Demand 16, 4100 represents Plan Head 41 (Machinery and Plant Programme, for any other Plan Head, its digits would be used, 00 should be replaced by suitable detail by looking up the Minor-Sub-and-Detailed head available in the appendix mentioned ahead) and XX represents the "Primary Unit" or "Object of Expenditure", which gives the detail of expenditure (these are available in Indian Railway Financial Code Vol. II - Appendices called "Classification of Accounts of Expenditure and Earnings). Following are the Primary Units for Demand 16…

S.No.

Object of expenditure

Primary Unit

1

Pay and allowance of Departmental establishment

01

2

Payment to casual labour

02

3

Payment to contractors and others for Engineering works or supply and erection contracts etc.

03

4

Direct supply of material

04

5

Stores supplied from stock

05

6

Freight on stores

06

7

Credit for released material

07

8

Others

08

9

Transfer of debits/credits affecting capital works expenditure/suspense account

09

10

Productivity Linked bonus

10

7. RIGHT MAN

This topic is separately covered as "Human Resource Management" in two lectures in Integrated course, with separate Handout Notes.

8. The Additional All Encompassing M - MONEY

Management of monetary resources can not be neglected. While it assumes dimensions of different proportion in Private sector or even Public Sector Undertakings -in Government Enterprises of the type of Indian Railways - it is very different. This is primarily so, because the earning departments are different from the spending departments, and therefore, the responsibility of spending departments (Mechanical being one of them, with minor exceptions at a few places), all that is required is to adequately foresee and plan for the funds required to carry out all activities in the next year.

8.1 Budget Cycle

For all Central Government Ministries (and State Government, too), the budget cycle begins in October XX (though budget estimate for next year is sent in August Review also), for the Financial Year April XX+1 to March XX+2 (so, if XX is 2001, XX+1 is 2002 and XX+2 is 2003). Since using XX, XX+1 and XX+2 will be very confusing, the Financial Year 2002-03 has been taken as an example.

The Budget Estimate (BE) for Financial Year 2002-03 (FY 2002-03) is prepared by all units (Divisions, workshops, Production units, subsidiaries such as RITES, IRCON, CONCOR etc) in October 2001 and sent to their HQ through their associate Accounts office (* a preliminary Budget Estimate for the next Financial Year is sent in August with August Review too, but the one actually taken into consideration is that sent in October, along with Revised Estimate for the current Year). At HQ it is compiled and sent to Railway Board, where it is compiled for the entire Indian Railways. Members of Railway Board hold meetings with GMs, FACAOs and PHODs in November/December 2001, to discuss any pertinent matters. Sometimes revision is necessary by some Railways, PUs or RITES, CONCOR etc.

The likely earnings and expenditure (i.e. the budget) is printed during Jan-Feb 2002, and tabled in the Parliament in Budget Session, which begins in the last week of Feb every year (the other sessions of the Parliament are Monsoon Session and Winter Session). MR introduces the budget with his speech. Railway budget is presented separately, followed by General Budget (which comprises earnings and expenditure of all other Central Government Ministries together) and is presented by the Finance Minister. This is so because, many years ago (around 1926), when Indian Railways was the largest of all ministries and its budget alone far exceeded the budget of all other ministries combined, it was decided to have it presented separately, and since then, though the number of ministries has mushroomed and their combined expenditure has also increased, the system has continued.

For the budget to be approved by the Parliament, voting has to be carried out after completing discussions on it on issues raised by MPs. While the discussion on budget continues in the Parliament, a vote-on-account is passed, to let the normal business of Government continue from April (generally, based on 25% of value of funds allotted for the previous year, expenditure is permitted in the first three months of the new Financial Year).

Along with the Railway budget, say in Feb 2002, several other documents are also tabled in parliament (a copy is given to each MP), which include

(i) MR’s speech Part I (containing changes in current year’s budget requiring approval of Parliament, due to variations in earnings and spending during the year); and Part II (introducing the budget for the next/coming year).

(ii) A booklet explaining the budget documents for MPs;

(iii) A booklet presenting the Performance Budget Review of Railways;

(iv) Summary of changes in current year’s budget.

(v) Details of changes in current year’s budget.

(vi) Indian Railways proposed earnings and expenditure statement for the year 2002-03.

(vii) Memorandum explaining changes in fares/rates.

(viii) Summary of next year’s revenue budget.

(ix) Details of next year’s revenue budget.

(x) Summary of Demand 16 (i.e. capital expenditure) proposals (containing WP, M&P, RSP).

(xi) Preliminary Works Programme (also called "Pink Book") - containing the Works, M&P and Rolling Stock Programmes for the FY 2002-03 (i.e. details of all proposed capital expenditure).

(xii) Indian Railways Year Book for the year 2000-01, along with a pocket book of key statistics.

(xiii) Indian Railways Annual Accounts for the year 2000-2001.

(xiv) Indian Railways Annual Statistics for the year 2000-2001 (Volume I - "Operating Statistics" and Volume II - "Commercial Statistics" - very useful documents which provide hoards of statistical figures which can be profitably used, nowadays combined into one book),

Towards the end of budget session of Parliament, usually in end of March 2002, the budget is finally passed by the Parliament. The sanction of Parliament is communicated to the Ministry of Railways by the Ministry of Parliamentary Affairs (and that of General Budget to the Ministry of Finance). The Ministry of Railways communicates the sanction of budget, with any modifications made by the Parliament after discussions, to various Railway HQs, PUs etc in April 2002. In May 2002, this is communicated to various Divisions of Railways. In June 2002, the Divisional Accounts Office communicates the grants allotted to various executive officers. Note, till June 2002, the expenditure is carried out on Vote-on-account, usually as per 25% of last year's grants (which is equivalent to 3 month’s amount).

The actual expenditure incurred by an executive officer is registered in the associate accounts office by about 3-weeks delay. So, in 3rd week of July, the expenditure up to end of June becomes correctly known. Therefore, in August 2002 and August Review (AR) is carried out - to determine the expenditure in the First Quarter of the year, compare it with the proportionate 3-months grants (i.e. the budgetary allotment) and project the requirement for the remaining 9-months to arrive at the figure for the whole year and compare that with the whole year's grants by arriving at the figure of variation, if any. The result of this exercise is also sent to HQ through the associate accounts office.

The Revised Estimate (RE) for the current year (i.e. Financial Year 2002-03) is prepared in October 2002, when the correct figures for 5-months (April to August) and approximate or quick figures for September are known, comparing it with half of Budget Allotment (i.e. proportionate budget), projecting the requirement for remaining six months, arriving at the total requirement for the whole year and comparing it with the total grants to determine any variations. At this time, the BE for the next Financial Year (i.e. FY 2003-04) is also prepared and sent along with this Revised Estimate for 2002-03 to HQ (this initiates the cycle of budget for the next year).

A First Modification is prepared in end of December 2002 with correct figures for 8-months, and a Final Modification is prepared in the end of January 2003, with correct figures of 9-months. Usually, First and Final Modifications are sent together in end of January 2003. Finally the closing of accounts and closing of books for FY 2002-03 takes place in June 2003 (extra 3-months are allowed for completing entries and accounts of earnings and expenditures). These figures for the entire Indian Railways are then compiled and produced in the Indian Railways Annual Accounts for the year 2002-03, which is presented in the Parliament in the next budget session (i.e. in year 2004).

Relate this to the preparation of Works Programme, M&P Programme and Rolling Stock Programme. These proposals have to be included in the Pink Book which is presented in the Parliament just before the beginning of the Financial Year in which these works are proposed to be carried out. Since the preparations of Works Programme estimates take about a year's time, the works for the FY 2002-03 have to be sent to HQ in Feb 2001 itself! The M&P items take lesser time in finalisation, so they are required by the HQ (Mechanical Branch) in May 2001, and RSP items (generally prepared by the HQ itself for Locos, coaches, wagons etc) but prepared by field units for capital spares/parts of these rolling stock and have to be sent to HQ in Sep 2001. All these programme items are examined by HQ Finance and then sent to Railway Board with approval of GM for further inclusion in Pink Book.

A recent notification by Railway Board communicates, that the need of planning is continuous and not sporadic, therefore, the proposals for capital expenditure may be forwarded round the year, at any time, and should be taken into consideration at the time of compiling and sending to Railway Board.

Let us, in a series, cast a look at the popular formats (prescribed by Railway Board and HQ) for BE, AR, RE, First and Final Modification (The formats and figures provided below are sample only).

Indian Railways Institute of Mechanical and Electrical Engineering, Jamalpur, Distt. Munger, Bihar - 811 214

First and Final Modification for FY 2001-02

ABSTRACT FOR DEMAND NO. 2

(Figures in Thousands of Rupees)

Primary Unit of Expenditure

Primary Unit

Actual Expenditure for First 9 months 2001-02

Estimated Expenditure for Last 3 months 2001-02

Final Modification estimate for 2001-02

Revised Estimate as asked for 2001-02

Variation between 5 & 6

Remarks for variation

1

2

3

4

5

6

7

8

Salary

01

8058

6942

15000

15715

-715

DA

02

3554

2946

8500

6757

-257

PLB

03

554

---

554

554

---

HRA

04

243

117

360

360

---

OT

11

222

162

384

384

---

NDA

12

23

12

35

33

+02

CCA

05

02

---

02

02

---

Other Allow incl TPA

13 + 07

529

291

820

820

---

Fees & Honoraria

14

16

184

200

100

-100

Transfer & Pack allow

15

71

01

72

58

+14

TA

16

429

1541

1970

2000

-30

Contingent Expenses

18 + 19 + 22 + 24

333

237

570

570

---

Cost of Materials from Stores

27

---

50

50

140

-90

Cost of Material - Direct Purchase

28

161

1339

1500

1500

---

Contractual Payment

32

1067

633

1700

4000

-2300

Other Expenditure

99

1167

1033

2200

2000

+200

16429

15488

31917

35193

-3276


Revised Estimate (RE) for FY 2001-02 and Budget Estimate (BE) for FY 2002-03



Detailed Head of Demand

Salary

DA

PLB

HRA

OT

NDA

CCA

Other Allowances including TPA

Fees and Honoraria

Transfer & Packing Allowance

TA

Contingent Expenses

Cost of Material from Stores

Cost of Material _ Direct Purchase

Contractual Payment

Other Expenses

Total

Primary Unit

01

02

03

04

11

12

05

07, 13

14

15

16

18 - 24

27

28

32

99

Actual Expenditure for 2000-01

13731

5388

526

359

158

30

Nil

726

29

80

1966

568

Nil

64

1524

2713

27862

Budget Allotment for 2001-02

16000

8500

525

400

105

35

Nil

675

100

25

2500

400

100

150

700

1000

31215

Revised Estimate for 2001-02

15715

6757

554

360

384

33

02

820

300

58

2000

570

140

1500

4000

2000

35193

Budget Estimate for 2002-03

17600

7457

604

390

414

36

---

900

330

63

2200

620

144

1500

4400

2200

38858


August Review Estimate (ARE) for FY 2001-02 --- ABSTRACT FOR DEMAND NO. 2

REASONS OF VARIATION WITH PREVIOUS YEAR



For First 3 Months

For Last 9 Months

Total for the Year

Variation between Col 7 & 8


Primary Unit




Estimated Expenditure for 2001-02


Requirement for 2001-02

1

2

3

4

5

6

7

8

9

10

Salary

01

5031

2530

8700

13185

13731

15715

+1984

DA

02

1947

1201

3441

5556

5388

6737

+1369

PLB

03

---

---

526

600

526

600

+74

HRA

04

120

73

239

287

359

360

+01

OT

11

63

99

95

61

158

160

+02

NDA

12

12

8

18

22

30

30

---

CCA

05

---

01

---

---

---

01

+01


13 + 07

230

173

496

557

726

730

+04

Fees & Honoraria

14

11

09

18

491

29

500

+471


15

15

27

65

00

80

27

-53

TA

16

877

177

1089

1823

1966

2000

+34

Contingent Expenses

18 + 19 + 22 + 24

135

74

433

496

568

570

+02


27

---

---

---

25

---

25

+25


28

61

---

03

1000

64

1000

+936

Contractual Payment

32

174

68

1350

3932

1524

4000

+2476

Other Expenditure

99

355

353

2358

1647

2713

2000

-713

9031

4793

18831

29682

27862

34475

+6613


August Review Estimate (ARE) for FY 2001-02 --- ABSTRACT FOR DEMAND NO. 2

REASONS OF VARIATION WITH BUDGET ALLOTMENT/GRANT



For First 3 Months

For Last 9 Months

Total for the Year

Variation between Col 7 & 8


Primary Unit

Budget Proportion for 2001-02


Budget Proportion for 2001-02

Estimated Expenditure for 2001-02


Requirement for 2001-02

1

2

3

4

5

6

7

8

9

10

Salary

01

4000

2530

12000

13185

16000

15715

-285

DA

02

2125

1201

6375

5556

8500

6737

-1743

PLB

03

132

---

393

600

525

600

+75

HRA

04

100

73

300

287

400

360

-40

OT

11

26

99

79

61

105

160

+55

NDA

12

09

8

26

22

35

30

-05

CCA

05

---

01

---

---

---

01

+01


13 + 07

169

173

506

557

675

730

+55

Fees & Honoraria

14

25

09

75

491

100

500

+400


15

05

27

19

00

25

27

+02

TA

16

625

177

1875

1823

2500

2000

-500

Contingent Expenses

18 + 19 + 22 + 24

100

74

300

496

400

570

+170


27

25

---

75

25

100

25

-75


28

38

---

112

1000

150

1000

+850

Contractual Payment

32

175

68

525

3932

700

4000

+3300

Other Expenditure

99

250

353

750

1647

1000

2000

+1000

7805

4793

23410

29682

31215

34475

+3260


August Review Estimate (ARE) for FY 2001-02 and Budget Estimate (BE) for FY 2002-03


SUMMARY STATEMENT (TOP SHEET)


Detailed Head of Demand

Salary

DA

PLB

HRA

OT

NDA

CCA

Other Allowances including TPA

Fees and Honoraria

Transfer & Packing Allowance

TA

Contingent Expenses

Cost of Material from Stores

Cost of Material _ Direct Purchase

Contractual Payment

Other Expenses

Total

Primary Unit

01

02

03

04

11

12

05

07, 13

14

15

16

18 - 24

27

28

32

99


13731

5388

526

359

158

30

Nil

726

29

80

1966

568

Nil

64

1524

2713

27862


16000

8500

525

400

105

35

Nil

675

100

25

2500

400

100

150

700

1000

31215

Latest Requirement for 2001-02

15715

6757

600

360

160

30

01

730

500

27

2000

570

25

1000

4000

2000

34475

Budget Estimate for 2002-03

16000

7557

660

396

176

33

Nil

803

110

28

2200

627

28

355

1980

3080

34033

8.2 Classification of expenditure in Railways

Recall the old saying once again - "In Railways you can do anything if you have availability of funds and sanction of competent authority."

Unless you understand the structure of your budget, i.e. how the budget is classified in Railways, you will not be able to prepare a budget for yourself (i.e. your activities). If you do this properly, remember that half of your job of having the "availability of funds" is taken care of, then you only need the sanction of competent authority to do what you want (after being able to convince them of it, of course.)

Consider the various items on which you would spend money - can you list some?

Perhaps the first ones coming to your mind would be - Material (From Stock and from, so called, Local Purchase, i.e. non-stock).

The next thing may be Staff salary, Dearness Allowance, Night Duty Allowance, Productivity Linked Bonus, Travelling Allowance, National Holiday Allowance, Transfer and Packing Allowance etc.

Some of you, who may have dealt with such activities, may be able to recollect spending money for - debits/credits from other units (for material taken or given on assistance), contractual payments (this is heavily utilised by Civil Engineers, Electrical Engineers, and even S&T Engineers), etc.

And, of course, there has to be one last - MISCELLANEOUS. Look at the table below, it gives all "PRIMARY UNITS" or "OBJECTS OF EXPENDITURE" ---

Primary Unit

Stands for

Primary Unit

Stands for

01

Salaries and wages

18

Office expenses

02

Dearness Allowance

19

Rental for P&T phone etc.

03

PLB

21

Advertising expenses

04

HRA

22

Utilities – Water, Electricity etc.

05

CCA

23

Rental for Office equipment

09

Wages of casual labour

24

Printing and stationery

10

Kilometrage allowance

27

Cost of materials – Direct purchase

11

OT Allowance

28

Cost of materials – Direct purchase

12

NDA

31

Fuel for other than traction

13

Other Allowances

32

Contractual payments

14

Fees & Honoraria

33

Transfer of debts/credits

15

Transfer Allowance

34

Adjustment of wages on POH

16

Travelling expenses

35

Adjustment of materials on POH

17

Air travel in lieu of privilege pass

99

Other expenses

To remember - PU 1 to 16 involves salary etc, 27 - Stock items, 28 - non-stock items, 32 - contractual payments, 33 - Debits/credits, 99 - Miscellaneous. Look at other PUs carefully, you can ask for funds in various PUs during Budget Estimate, and in the following Financial Year - indicating that the activity (say, Printing and stationery) was planned and has to be carried out (say printing of carry-handbook for diesel drivers), seek sanction of competent authority and get the work done.

However, this alone would not classify all the expenditure Indian Railways incurs adequately. So, the expenditure is divided into different DEMANDS. They are called "Demand", because the proposed budget expenditure for a financial year (and expected earnings in that Financial Year), are placed in the Parliament during the Budget session in the form of Demand for Grant of money to spend for conducting the normal business of the Indian Railways, and after okayed by the Parliament, it actually becomes the budget for that Financial Year.

The DEMANDS of Indian Railways are from Demand 01 to Demand 16 (remaining Demands - 17, 18, 19 etc up to 79 belong to various other Ministries of Central Government, new Ministries or Departments, when created are assigned to existing Demands for their grants or new Demands are created for them by the Finance ministry. The budget of all other Ministries combined is prepared by the Finance Minister and presented in the Parliament by Prime Minister, called the General Budget).

Following is the purpose, which these Demands highlight/meet…

(I) Policy formulation.

Demand 1. Railway Board.

Demand 2. Miscellaneous Expenses (General).

(II) General Superintendence and Services on Railways.

Demand 3. General Superintendence and Services on Railways.

(III) Repairs and Maintenance.

Demand 4. Repairs and Maintenance of Permanent Ways and Works.

Demand 5. Repairs and Maintenance of Motive Power.

Demand 6. Repairs and Maintenance of Carriages and Wagons.

Demand 7. Repairs and Maintenance of Plant and Equipment.

(IV) Operation.

Demand 8. Operating Expenses – Rolling Stock and Equipment.

Demand 9. Operating Expenses – Traffic.

Demand 10. Operating Expenses – Fuel.

(V) Staff Welfare, Retirement Benefits and Miscellaneous.

Demand 11. Staff Welfare and Amenities.

Demand 12. Miscellaneous Working Expenses.

Demand 13. Provident Fund, Pension and Other Retirement Benefits.

(VI) Railway Funds and Payments to General Revenues.

Demand 14. Appropriation to Funds.

Demand 15. Dividend to General Revenue, Repayment of Loans taken from General Revenues and Amortisation of over capitalisation.

(VII) Capital Expenditure

Demand 16. Assets - Acquisition, Construction and Replacement.

Demands 01 to 15 are called Revenue Demands - because they reflect the expenditure to be incurred by Indian Railways every year to earn its revenue, as they reflect the routine business of the Indian Railways.

Demand 16 is called the CAPITAL DEMAND, because it represents the requirements of funds by Indian Railways for asset building - i.e. laying new lines, constructing new bridges, acquiring new machinery, etc.

Note carefully the various groups of Demands and what they represent. Also note the Demands divide the expenditure such that the entire Indian Railways expenditure is separately classified for easily determining the expenditure on any of these singly. However, this too, is not the complete classification yet. Each Demand is further divided into Minor, Sub and Detailed Heads.

A Minor Head under any Demand is a three-digit number in hundreds (i.e. last two digit always being 0s, e.g. 100, 200, 300 etc). Each Minor Head, is further divided into Sub-Heads, which is also represented by a three-digit number in tens (i.e. the last digit is always 0, e.g. 110, 120, 130, 210, 220, 230, 310 etc). Each of the Sub-Heads is further divided into Detailed Heads, which is also represented by a three-digit number (this number will never have a 0 at the end, e.g. 111, 112, 113, 121, 122, 123, 131 etc). When we refer to a Minor Head, it indicates inclusion of all Sub-Heads (and, therefore, also all Detailed-Heads) under that Minor-Head.

Along with a Demand, these digits make a combination, such as

01-100, indicating Demand 01 and Minor-Head 100,

02-110, indicating Demand 02 and Sub-Head 110,

05-311, indicating Demand 05 and Detailed-Head 311.

Dd

Minor Head

Sub Head

Detailed Head

03

100 General Management

110 Estt of the GM

111 Offices

112 Office establishment

113 Contingencies

120 Estt of the DRM

121 – 123 As above

Dd

Minor Head

Sub Head

Detailed Head

04

100 Estt in Offices

110 Officers and office estt

111 …

112 …

113 …

120 Supervisory staff and their office staff

121 …

Some important Demands and their Minor Heads for Mechanical Engineers are given below…

Dd

Minor Head

Minor Head

05

100 Establishment in offices

500 Electric Locomotives

200 Steam Locomotives

600 Rail Cars

300 Diesel Locomotives

900 Credits or Recoveries

Dd

Minor Head

Minor Head

06


500 Elec Gen – Train Lighting, Fans, AC

200 Carriages

600 Misc repairs & Maint. Expenses

300 Wagons

400 EMU coaches


Dd

Minor Head

Minor Head

07


500 P&E – Signalling

200 P&E – Way & Works

600 P&E – Telecommunication

300 P&E – Mechanical

Etc.

400 P&E - Electrical

Dd

Minor Head

Minor Head

08

100 Steam Locomotives

… … …


800 Ferry services

500 C&W


Demand 10 is also important for working out the total fuel expenditure (generally by DyCME (R&L) at HQ in consultation with Traffic Branch directly).

Demand 16 is important for asset acquisition - important ones being M&P Programme (Plan Head 4100), Workshops and Production Units (Plan Head 4200), Rolling Stock Programme (Plan Head 2100) and others depending on local requirements (1700 for Computerisation, 3300 for S&T works (Telephones, Intercom etc)).

The complete "Head of Allocation" thus consists of…

For revenue expenditure - dd-hhh-pu (dd - Demand number, hhh - Minor, Sub and Detailed Head, and pu - Primary Unit). For ease in computerisation, padding zeroes have been added instead of the dash ( - ), so that the head of allocation may be entered as a number, and it takes the form dd0hhh0pu.

For capital expenditure - ABC 16-hhhh-pu (ABC - three character abbreviation for allocation, 16 - Demand number (this is often omitted, as the three character code amply clarifies that the Demand of expenditure is 16), hhhh - detailed head of allocation, pu - Primary Unit).

Remember that if last digit in Detailed Head is 0, it indicates expenditure of all detailed heads taken together. Similarly, if Detailed-head and Sub-head digits are both 0, it indicates all Sub-Heads and all Detailed-Heads within that Minor-Head taken together. This is useful in preparing summarised expenditure statements. Your associate accounts office sends you a monthly statement of expenditure giving the expenditure in that financial year up to that month (usually for the month of April, this statement would be ready by end of May). This very important document is lost in the huge bulk of DAK received in Mechanical Department's offices every day!

Earlier, these Demands were represented by letters of the English alphabet - Demand 3 by 'A' (called Abstract A), Demand 4 by 'B' (called Abstract B), and so on. Some Railways prefer to write this at the top of budget statements to this day.

Let us look at an example of a diesel shed…

The Demands under which it would spend money would be…

· Demand 05 - salaries, material etc. for maintenance of Diesel Locomotives (exploded in greater detail further ahead).

· Demand 07 - repairs and maintenance costs of machinery and plants (including 140 ton cranes - as these are treated as vital machinery and not as Rolling Stock). The salary, material etc used on these cranes should be charged to Demand 07, which at many places, gets charged to Demand 05, thus inflating the cost of Repairs and Maintenance of Locomotives unnecessarily (and to the advantage of justification for Electrification).

· Demand 08 - Operating expenses of a Diesel Shed include the Loco Foreman's office, salaries of his staff (shunters, pointsman, Diesel Shed control office staff etc) - as these are requirements of Railway operation and not maintenance of locomotives in the shed. The locomotives in the shed can be maintained without any of these staff - it is for sending the locomotives out for running trains and bringing them back from operation that this staff is functioning, so they are Operating staff. Uniform, material etc consumed by these staff (kerosene for lamps, batteries, shoes, coats, uniform, stationery, etc. amount to a huge sum). This figure also wrongly gets charged to Demand 05, causing a further undue increase in the overall cost of maintenance of Diesel Locomotives!

· Demand 10 - Fuel costs, these are normally determined by HQ (the order as well as periodic distribution is closely monitored by HQ). This covers the cost of Diesel for diesel locomotives (also Electricity for Electric Locomotives, and coal for steam locomotives (steam locomotives continue in some narrow gauge regions of IR, merely as a tourist attraction).

· Demand 12 - (Minor-Head 500 Cost of training of staff) applicable to those Diesel Sheds which have a Training School attached, this includes the amount paid to Apprentices as stipend, salaries of staff deployed in training etc. Asking for funds here, you can buy training equipment for your training school too.

Under Demand 05, the various Minor Heads are as below…

dd-hhh

Description

05-100

Establishment in offices

05-200

Steam Locomotives

05-300

Diesel Locomotives

05-500

Electric Locomotives

05-600

Rail cars, Ferry steamers and other maintenance expenses

05-900

Credits or Recoveries

Let us look at Head 05-300 in greater detail…

DEMAND 05


310 Running repairs in sheds

Diesel Electrics…

311 Body, bogie and brake rigging

312 Traction motors and other electrical rotating machines

313 Engine

314 Compressors and exhausters

Diesel Hydraulics…

315 as in 311.

316 Transmission equipment

317 as in 313

318 as in 314

320 Running repairs done in workshops for sheds

321 to 328 as in 311 to 318

330 Periodic overhauls

331 to 338 as in 311 to 318.

340 Intermediate overhauls

341 to 348 as in 311 to 318.

350 Special repairs

351 to 358 as in 311 to 318.

360 Other repairs

361 Control, cables and other running repairs - Diesel Electrics.

362 Control and cables and other running repairs done in workshop for sheds - Diesel Electrics.

363 Control and cables and other repairs - Periodic overhaul - Diesel Electrics

364 Control and cables and other repairs for intermediate overhaul - Diesel Electrics

365-368 Same as in 361 to 364 for Diesel Hydraulics

370 Miscellaneous charges including adjustments

371 to 374 Diesel Electrics - Same as for 272 to 275.

375 to 378 Diesel Hydraulics - Same as for 272 to 275.

* 272 to 275 (for Steam Locomotives) read as below…

272 Trials and experiments.

273 Special adjustments.

274 Overcharges and undercharges - On cost.

275 Overcharges and undercharges - Manufacture and repairs.

On adding the Primary Unit ("Object of Expenditure") to the dd-hhh given in above table, the "Head of Allocation" for a particular expenditure becomes complete. Thus, the Officers salaries would be charged to 05-111-01, their Dearness Allowance to 05-111-02 and so on.

At the time of preparing a budget for next Financial Year, you must take care that you ask for adequate funds under each Detailed-Head separately (which is very difficult to predict) or under each Minor-Head after giving it a careful consideration.

You may like to prepare a zero-base-budget (ZBB), if not for all your Demands, then at least for those where you incur huge expenditure. If you cast a look at any previous year's expenditure, you can determine in which demands (and further, in which Minor, Sub or Detailed heads your expenditure is high) and select only a few of them (at a time) to be reviewed on ZBB principles.

8.3 Preparing your budget (on zero base budgeting (ZBB) principle)

ZBB means, not looking back at the previous year's expenditure and up-scaling it by inflation index to determine the next year's budget (one who sees behind and moves ahead will definitely fall - you should pause, look behind, note the errors committed, correct them and then look ahead and move forward). This look-behind-walk-ahead is the most common folly practised in Mechanical Department of IR - not only where budget is concerned, but even in day-to-day technical work. Remember that in copying the past, we copy its mistakes too!

ZBB means to determine in totality the activities to be carried out by your organisation in the next Financial year, say…

(1) Maintenance of, say 100 locomotives, requiring…

(a) PU 1 to 16 - Payment of salaries to Officers and staff - this can be planned by taking the pay-scales, with number of sanctioned posts in each pay-scale and average basic pay in each scale, multiplying and totalling the figure to arrive at budgetary requirement in PU 01. Dearness allowance can be determined as a percentage of this, with provision kept for enhancement in DA twice in a year giving the figure for PU 02. Transfer allowance can be estimated with number of likely retirements in next year to be replaced by people from other units. Office Superintendent of the Personnel Department should prepare this figure (but you will rarely find an OS of Personnel Department who has enough idea about preparing a budget in Mechanical offices).

(b) PU 27 (Cost of material from stock) - (VERY IMPORTANT) This exercise would require the help of computers, as the number of stock items would be large. To determine the correct requirement of each stock item required for 100 locomotives during the year (giving consideration to pre-mature failures based on experience, and subtracting for locos expected to be overhauled by workshops (where the material will be provided by workshops, and they will raise debits on you, which you will accept under 05-330, some Railways allot the entire grant under 05-330 to workshop nominated for POH of diesel locomotives so that sheds do not have to worry about its debits). Stores section should prepare this figure.

(c) PU 28 (Cost of material from direct purchase) - (MOST IMPORTANT) as it covers your need for non-stock items, wherein are included 100s of items which may be unplanned. However, if you take a list of all items indented in, say, last five years, it would cover any material, which may be required by the shed. Assess the quantity of all such material by getting the expected consumption from in-charges of all sections of the diesel shed, total the quantity and multiply by the going rate of the item to arrive at the figure of required budget. Add a suitable margin for out-of-course indents necessary to be placed. Stores section should prepare this figure too.

(d) PU 32 (Contractual Payments) - (VERY IMPORTANT) This provision is for meeting the payments for activities carried out by outside parties for the diesel shed on contract - such as reclamation of cam-shafts, gear cases, traction motor end-shields (both ends), shed-cleaning contract, material transportation contract and any other work you may think fit for carrying out on contract etc. You may keep allocation here for Departmental or Inter-departmental work orders too (for example, placing a work order on Electrical Department to install additional lighting in pit or any other civil/S&T type of work). Departmental work orders above Rs 50,000/- have to be vetted by Associate Accounts. Sometimes you may like to order material made according to your drawing from workshops (such as instruction boards, cleaning tanks etc).

(e) In Demand 07 - it will cater to Annual Maintenance Contracts of various machines (Dynamic Balancing machine, computers, vehicles, material handling equipment, EOT cranes, any other machine/plant you may like to include on AMC).

(f) PU 33 (Debits and credits) - This PU must contain sufficient funds for accepting material from DLW (import indent and bulk indent items) and received from other sheds/workshops on assistance. You must make sure you raise debit on other units to whom you provide material on assistance, through debit vouchers, have them accepted by them and realised in your budget.

(g) PU 99 (Miscellaneous) - is to cover any contingency expenditure, which was not planned and budgeted for. Sometimes, when the funds available under a particular PU fall short during the year, they can be realised from this PU, but now before convincing accounts of its urgent need.

In preparing your budget on ZBB principles, you must look back at your previous year's budget too ensure that you have not missed out anything (if the variation in your figure and previous year's budgetary figure is too high (on +ve or -ve side) you may consider going through all the vouchers of expenditure in previous year to ensure you have covered all activities (for example tyre-turning charges for locos for sheds not having wheel-turning machines, is also a huge expenditure - which should be planned in Demand 08, as it is an operating need not a need for maintaining the locomotive.

A word on expenditure in Demand 05 and 08 is necessary here. While Demand 05 is to cater to (and purely to) the funds needed for maintaining the locomotive, the funds (for staff salaries etc, materials from stock or non-stock, and anything related to it) required for running the locomotive should be planned and also booked under Demand 08 - such as,

· Requisitions for brake-blocks (as they are consumed during running/operation of the loco and not in its maintenance), lubricating oils (by same logic), all greases and oils (by same logic).

· Non-stock indents for similar items etc.

It is worth pondering that why should the (huge) amounts/funds required for lubricating oil filters, all other filters in the locos, entire braking system including compressors/exhausters, dynamic braking system, etc not be charged to Demand 08 - as they are all (loco) operating needs.

Tips…

· Plan, calculate and ask for adequate funds at the BE stage itself to avoid shortage of funds during the year. You will seldom be disappointed.

· Make sure every expenditure is being booked correctly. Items chargeable to other demands, if drawn against your demands will deplete your availability of funds, e.g., oils, lubricants, brake blocks should be charged to Dd 08 being operating expenses. (Your Loco Foreman’s staff also is paid from Dd 08).

· During the year, only re-appropriation can be done by HQ, if funds are surplus in another Minor-Sub-Detailed-head (but within the same demand).

· Pay special attention to PU – 27, 28, 32 (32 is utilised extensively by Civil, Elec, S&T but least by Mech. Greatest financial powers are contained here.), 33 and 99.

· Pay even attention to – 18, 19, 21, 23, 24 (if you intend to use them for a good measure).

· Maintain your own liability registers. It is mandatory for every budget controlling officer - and only then you can authentically certify funds availability.

· The same register can help you assess your need for funds during AR, RE, Ist M and Final M.

· Understanding of budget and purchase processes will give you clear understanding of requirements for concurrence/vetting of your proposals by associate accounts. (Vetting is the process of reserving funds from allotted funds/grants after examining a proposal for a particular work/item and assuring that it had been planned and funds for it had been asked already (in BE); Concurrence is the process of examining a proposal for grant of funds after establishing its usefulness/rate of return on investment in it).

Endnote

Possessing the following additional information/knowledge will be helpful to you in your working…

· Powers for carrying out repairs to machines, plant and equipment.

· Handling of Works contracts/Tenders.

· Workshop Manufacturing Suspense Account for workshops.

· Costing systems in Railway Workshops.

· HRM – Staff selection (for various categories), trade-tests, promotions, D&AR, awards, CRs, Welfare Organisation Structure and Functions, Labour Laws, Industrial Act, Trade Unions in Railways etc.

(There’s no end to Knowledge.)

Right Material + Right Machine + Right Means + Right Man + Right Method = Right Job.

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Prepared by Madhukar Dayal, Professor (IT), email: [email protected]

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