PPT about preparation of Indian Railways Budget in detail

1. Indian Railway Budget
Preparation
Damodara Prasad K
Sr.AFA (retd.)
09491043283

2. Budget - Overview
• Constitutional Prescription
• Prescribes Targets
• Helps as Co-ordinating mechanism
• Helps as Management Tool for control
• Helps to evaluate performance
• Helps to identify the areas of concern
• Helps plan for the future

3. The Railway Budget
• an instrument of Parliamentary Financial
Control
• an important management tool.
• Parliamentary Financial Control is secured
– by obtaining Parliament's prior approval for all
'voted' expenditure
– system of reporting back to it, through the Public
Accounts Committee, the actual expenditure
incurred against the Grants voted by Parliament
and Appropriations sanctioned by the President.

4. The Accounts Department is mainly responsible for
(Para 101 Accounts Code Vol.I )
• Keeping the accounts of the railway in
accordance with the prescribed rules:
• Compilation of budgets in consultation with
other departments and monitoring the
budgetary control procedures as may be
laid down in the relevant orders and Code
rules from time to time ;
• Generally discharging other management
accounting functions such as providing
financial data for management reporting;
• Seeing that there are no financial
irregularities in the transactions of the
railway.
4

5. Parliamentary Financial Control Mechanism
• Budget: Railway Budget is an instrument of Parliamentary Financial Control, which is
secured not only by the fact that all ‘voted’ expenditure must receive Parliament’s
prior approval, but also by the system of reporting back to it, through the Public
Accounts Committee, the actual expenditure incurred against the Grants voted by
Parliament and Appropriations sanctioned by the President.
• Supplementary Budget: Parliament by way of passing Railway Budget fix the financial
limit before the Railway within which Railways are empowered to incur expenditure.
Additional fund, required if any, during a financial year also requires clearance from the
Parliament through passing of the Supplementary Budget.
• Appropriation Accounts: After closure of Annual Accounts of Railways, Appropriation
Accounts are prepared showing actual expenditure incurred on various activities of
Railways vis-a-vis allotments as approved by the Parliament through Railway Budget
for ensuring that the money shown in the accounts as having been disbursed were
legally available for and applicable to the service/purpose to which they have been
applied /charged. Appropriation accounts are examined by a Parliamentary Committee
( the Public Accounts Committee).
• Parliamentary Committees: Besides the above, the Parliament also exercises its
control through various Parliamentary Committees like the Railway Convention
Committee ( which suggests the whole working mode and methods of capital
investment, rate of dividend etc.), the Estimates Committee , so on.

6. Expenditure
Revenue Expenditure
Expenditure the benefit of
which is within the Financial Year
Works Expenditure
Expenditure the benefit of which
lasts for many years and may
result in
increase in earnings and/or
reduce expenditure for many years

7. STRUCTUREOFRAILWAYBUDGET-1
ActualsofLY
RevisedEstimatesofCY
Railway
Budget
February
BudgetEstimatesofEY

8. Abstract X Pass, OC Demand No.1 Railway Board
Abstract Y GOODS Demand No.2 Misc estt under Rly board
Abstract Z SUNDRY Demand No.3 Genl Superintendance and Services
Demand No.4 Repairs and Maint of P. Way and Works
Demand No.5 Repairs and Maint of Motive Power
Demand No.6 Repairs and Maint of Carr and Wagon
Demand No.7 Repairs and maint of Plant and Equipment
Demand No.8 Optg Exp Rolling Stock and Equip
Demand No.9 Operating exp - Traffic
Demand No.10 Operating Expenses - Fuel
Demand No.11 Staff Welfare and amenities
Demand No.12 Misc. Working Expenses
Demand No.13 PF Pension Retirement benefits
Demand No.14 - Appn to RLY FUNDS
Demand No.15 Payments to Genl Revenues
Demand No.14 (RLY FUNDS) PH 11 NEWLINES PH 32 BRIDGES
LOANS CAPITAL FROM GOI PH 14 GC PH 33 S&T
MARKET BORROWING PH 15 DOUBLING PH 36 O Eele Wks
PPP PH 16 TFC FAC PH 41 M&Plant
MB (IF) PH 17 COMPU PH 42 Workshops
PH 21 Rlg Stk PH 51 Squarters
PH 22 LEASE PH 52 Samenties
PH 29 LC gates PH 53 Pamenties
PH30 ROB RUB PH 64 OtherSpWk
PH31 T Renewals ETC
STRUCTURE OF RAILWAY BUDGET-2
REVENUE BUDGET
EARNINGS/RECEIPTS EXPENDITURE
WORKS BUDGET

10. Spending Units
• Smallest Unit which is a Cost Centre,
accountable for execution of specific activities
prescribed in the Budget.
• Expected to regulate commitments as per
provisions in the Budget to achieve the targets
set in the Budget.
• Required to monitor the actual expenditure as
per Budget Proportions.

11. Liabilities Register
• Records the liabilities committed Primary Unit
Wise.
• Helps monitor assess the undischarged
liabilities at any point of time.
• Helps early submission of Budgetary Reviews.
• Helps check the correctness of computer
generated FMIS statements received from IT
Centre.

12. Demand/Dept Genl Accts Persl Stores Engg Mech Elect S&T Optg Comml Claims Catering Medical Security
3-A
4-B
5-C
6-D
7-E
8-F
9-G
10-H
11-J
12-K
13-L
SPENDING UNITS
TABLESHOWINGREVENUEEXPENDITUREDEMANDSANDTHESPENDINGUNITS/DEPARTMENTSOPERATINGTHEDEMANDS

13. NODAL OFFICER FOR D#16
S.No. Plan Head PHOD Concerned
1. New Lines, Doublings and Traffic facilities COM
2. Passenger Amenity CCM
3. Track renewals, Bridge works and OSW PCE
4. Road Safety works- ROB/RUB CBE
5. Computerisation FA&CAO
6. Signal & Telecom works CSTE
7. Workshops CME/ CWE

14. Demand No.16 Sources of Finance
• Capital (Loan - Dividend Payable) - Remunerative Works
• Capital Fund (1.4.93) – IRFC payments
• DRF - Replacements
• DF – Safety and Un-remunerative Works
• SF- (Contribution from Central Road Fund)
• Market Borrowings

15. Plan Heads and Sources of Finance
Plan Head Cap C F DRF DF SF
11 Newlines
14 Gauge Conversion
15 Doubling
16 Traffic facilities
17 Computerization
21 Rolling Stock
22 Lease Assets Cap comp.
29 RSW LC GATES
30 RSW ROB RUB
31 Track Renewals
32 Bridge Works
33 S&T Works
35 Electrification
36 Other Electrical Works
41 M&P
42 Workshops
51 Staff Quarters
52 Amenities for Staff
53 Passenger Amenities
64 Other Specified Works
Cap Susp. PH 71,72 and 73

16. RE/BE
• Special features and gist of variations between
BG-RE & RE-BE for each demand be given.
• RE should be based on the actuals of 1st
6m
+approx. for 7th
m. Savings achieved to end of
Oct. be sustained.
• Post budgetary increases and unforeseen exp.
be met within the BG.
• Credits/Recoveries be estimated with utmost
care.

17. RE/BE
• Variations under each MH be explained by
taking all PUs together; and by PUs for
demand as a whole.
• Projections be made under new PUs like PU
41; 42,43,44 (dues arising for the current year
should not be treated as arrear);52; 45; 46-48
(37-deleted);
• Reflect PU 25 only in D.11 120; PU 08 only in
D.13 890; PU 20 in D.03-12;

18. SUMMARY of OWE
• a summary of the ordinary working expenses
comparing, under each demand,
• the actuals during each of the preceding three
years, with the budget grant and revised
estimates for the current year and budget
estimates for the following year.
• The figures of actuals should agree with those
appearing in the final accounts intimated to the
Railway Board and the differences, if any, should
be suitably explained in the remarks column.

19. RE/BE
• Annexure R-3: Staff statements for all demands
(03-12)under each MH for Act, BG, RE and BE. Act
should tally with 40-I of Annual Staff Stat. BG
should tally with figs. in Demands Book Pt-II.
• Variation in staff strength be explained wrt
creations/surrenders/filling up of vacancies.
• Annexure R-4: Performance Units of Exp in D.04-
12 as in Demands Book Pt-II. Data should be
reconciled with the data of S&AO.
• Annexure R-5 & 6: Traction-wise correlation and
rates of Fuel.

20. RE D.16
• Credits likely to be generated in RE should be
estimated.
• Due regard be given to the upto-date progress of exp
and commitments likely to materialise.
• Projections shall be given for new PH 3700 Tr.D works
by segregating works between 3600 & 3700.
• PH 13 Restoration of dismantled lines, deleted.
• PU-12 CD deleted, 46-48 introduced.
• Source OLWR deleted.
• RE should also cater for the Zonal Rly. works executed
by RVNL.
• Key questions regarding EBRs to be considered are
1.Financing issues 2. Expenditure decisions 3.
Management issues.

21. RE D.16
• RE projections under inventories be realistic. Actuals
shall match with the figs. in the schedules sent to Board.
• Internal and mutual co-relation be maintained in case of
Stores Suspense and WMS.
• Annexure W-6: Details of WBA
• Annexure W-7: Details of debits raised/accepted- this
should be reconciled with the concerned railway to avoid
duplication.
• Annexure W-14: Staff strength and exp- should indicate
staff in CN org.
• Reasons for projection, where no original grant exists be
given.

22. EARNINGS RE/BE
• Trend of traffic performance in 1st
7 months be
considered.
• Adverse impacts of earlier part of the year should
not be projected mechanically for the whole
year. Reasons for variation in projections from
the trend be clearly mentioned.
• Anticipated traffic out-put i.e., originating traffic,
lead, rate be assessed correctly for each
class/commodity-wise data for passenger and
freight traffic.

23. EARNINGS RE/BE
• Other Coaching : break up of earnings from parcel,
military, postal and other traffic be furnished.
• Anticipated Traffic Plan shall be generated.
• Monthly originating earnings from pass, goods and
other coaching traffic be furnished - Ann E1: Traffic
plan Pass; Ann E2: Traffic plan Goods; Ann E3:
monthly details of originating apportioned earnings;
Ann E4: monthly details of safety surcharge.
• Detailed traffic projection with supporting estimate
of earnings shall be furnished.

24. CIVIL ESTIMATES
• Requirement of funds for Loans and Advances
• Projection for appropriations under I. Tax;
Interest on Debt and other obligations ; Abstract
F-Loans and Advances, Abstract- I Small savings;
Abstract- J Reserve Funds; Abstract- K Deposits
and Advances; Abstract- L Suspense Misc.; and
Abstract- M Remittances for current fiscal and
next year shall be furnished.
• Interest on PF be assessed realistically
considering OB, Actual/anticipated transactions
during the fiscal.

25. IMPORTANT DATES RE/BE
Estimate of Earnings - 20th December
Revenue Demands 2 to 15 - 1 st December
Civil Estimates - 15th December
Works Demand 16 - 23rd December

26. Revenue budget - 2016-2017
Budget estimate- Nov./ Dec. 2015
Budget presentation- Feb.’2016
Budget orders- Apr.’2016
August review- Aug.’2016
RE 15-16/ BE 16-17 Nov./Dec.2016
Revised Grant- Feb.’2017
Final Modification- Mar.’2017
Cash book close- 31.03.2017
Closure of Mar. Accounts- Jun.’2017
Appropriation Accounts- Aug./ Sep.’2017

27. 1G.Traffic Receipts
2Misc.Receipts
3Total Receipts
4NET OW Expenses
5APPN PN
6APPN DRF
7
Total
WE(4+5+6)
8Misc. Expenditure
9Total Expenses
10
Net Revenue (3-
9)
11Dividend
12Excess/Shortfall
13APPN DF
14APPN CF
15APPN DSF
16OR(%)

28. Railway Budget 2016-17 -
EarningsDescription Target
2016-17
Rs. in Cr
SCR
Abstract X – Passenger Earnings,
Other Coaching Earnings
51012
6185
4747
576
Abstract Y – Goods Earnings 117933 11212
Abstract Z - Sundry Earnings 9590 560
TOTAL 184720 17095
Suspense (Station O/s, AOB, Cash in Transit, Dem.
Recoverable)
100 2
Gross Traffic Receipts 184820 17097

29. Railway Budget 2016-17 -
Expenditure
Description Budget Grant
2016-17
Rs. In Cr
SCR
Net Ordinary Working Expenses 123560 10505
Appropriation to Pension Fund 42500 2996
Appropriation to DRF 3200 193
Total Working Expenses 169260 13694
Operating Ratio target for 2016-17
IR: 92.0%
SCR: 79.9%

30. Defects in Budgeting
• Excess projection of funds in Budget Reviews
without taking into consideration various
factors influencing the requirement of funds.
• Rectification of mistakes, clearance of
suspense balances not considered.
• Non-surrender of funds.
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31. Steps to prevent
Defects in Budgeting
• Maintain proper record of liabilities for the
year for each commitment made.
• Project requirement of funds in Budget
Reviews as per liabilities register.
• Surrender funds in Budget Reviews, if the
liabilities are not likely to materialize.
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32. Railways should ensure that the data
on which forecast is based, is
adequate and reliable and also that
the conclusions arrived at from the
data is sustainable by past experience
and future expectations of likely
events.
Extra money asked for but not utilised
gives rise to Audit to pint out cases
under defects in budgeting.
Steps to prevent
Defects in Budgeting

33. Budget Proportion
• Prescribed for all the 12 months for
revenue demands.
• Helps monitor month-wise progress of
expenditure with reference to monthly
targets.
• Used as a control Mechanism.

34. Financial Management Information
System (FMIS) Reports
to Spending Units
• Expenditure for the month and to end of the
month Demand-wise, SH-wise (activity-wise),
PU-Wise.
• Facilitates reconcilation n accountal of
expenditure of the Spending Unit as per the
incidence of expenditure certified by the
Spending Unit.
• To advise the incorrect expenditure if any
booked to the Associate Accounts for
clarification/rectification.

35. Requirement of Large Provisions,
Surrender of Substantial Savings
• To be included in August Review Estimates,
Revised Estimates and Final Modification
Estimates.

36. Steps to prevent mis-
classifications of expenditure
Thorough Review of FMIS Reports
• Account Current - By Accounts Department –
Books and Budget Sections
• Control Over Expenditure Statements by
Departments
• Prompt rectification of mistakes by both
Executive and Accounts departments
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37. Rectification of Mistakes
• Review of Actual Expenditure with reference
to Grant allotted to be done every month.
• Audit Objections, if any, on incorrect
allocations are to be rectified at the earliest,
to know the actual expenditure against each
source/plan head for proper projection of
requirement of funds in Budget Reviews.
• Clearance of MAC for Supply of Stores to be
done regularly for proper review of
Expenditure.
• To be done as per Para 922 of Financial Code
Volume I

38. 38