PROJECT REPORT ON ANALYSIS OF BUDGETING PROCESS IN INDIAN RAILWAYS

Bachelor of Management Studies Semester V 2010-2011 In partial fulfillment of the requirements for The Award of the Degree of Bachelor of Management Studies By Ranjeet Ramaswamy Iyer

Acknowledgement

The project on Analysis of budgeting process in Indian Railways is a good result of co-operation, hard work and good wishes of many people. I am eternally grateful to god-almighty for bestowing his blessings on me by the virtue of which I could complete this work successfully. I owe my gratitude to my guide professor Parvath i Venkatesh her immense encouragement, untiring zest to help, sound criticism and above all her motivation. I also wish to thank my course co-ordinator professor Aparna Jain whose encouragement was extensive. I extend my gratitude also to Mr. Rajendra. P. Saxena, Chief Engineer (Planning), Western Railways and Mr. C.V.L Phani, Senior Sectional Engineer (Drawing), Western

Railways for their guidance with necessary materials and for their precious time allotted to me throughout this project.

Index
S. No.
1. 2. 3. 4. 5. 5.1 5.2 5.3 5.4 5.5 5.6 INDIAN RAILWAYS History of Railways in India Railway Zones and their Head Quarters Budget Railway Budget History of Railway Budgeting in India The Actworth Committee The consolidated fund of India Demand for Grants Budget planning Compilation and scrutiny of budget in the Railway Board 5.7 5.8 5.9 5.10 5.11 Submission to the Minister Presentation to the Parliament Appropriation Bill Administering the Budget Responsibility of Railway Administration in case of Excess or Lapse 5.12 Powers of Railway Administrations in case of emergent and inevitable expenditure 5.13 5.14 5.15 Powers of the Railway Board Powers of the Railway Administration Unforeseen Expenditure- operation from the Contingency Fund of India
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Topic

Page No.

9 9 13 18 18 19 21 22 22 24 30

31 32 32 32 34

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36 36 37

6 7 8 9 10 11

Gist of Railway Budget 2010-2011 Analysis of Revised Estimates 2009-2010 Analysis of Budget Estimates 2010-2011 Annexure Conclusions and Recommendations Bibliography

30 61 62 65 66 68

Executive Summary

A budget is a list of all planed revenues and expenses. Budget is important to Indian Railways as it has a vast operational system spread across the length and breadth of the country. It enables the actual financial operation of the Railways to be measured against the forecast. Every year the Railway Minister presents th e Railway Budget in the parliament in the month of February. Railways in India dawned in 1853 and ever since its origin, it has never turned back As per the recommendations of the Actworth Commitee, the railway finances were separated from the general finances of the government through a Separation Convention in 1924 and hence Railway Budget is separately presented in the parliament before the General Budget. Today Railways has over 64,000 route kilometres across India and is considered as the Lifeline of the country. For proper planning, decision making and allocation of resources, proper budgeting is necessary. Budgeting in Railways is not a days or a weeks job. It involves many people and has many steps and procedures which need to be followed systematically so that the Railway Minister can present a sound and a competent budget in the parliament. The role of competent workforce and proper flow of information is ut most necessary to make a good budget. Indian Railways budget boasts about huge figur es which is definitely higher than the budget of many small nations. Through this project, we will briefly look into the budgetary activities and procedures involved which makes up a good budget. We will also discuss the gist of the Indian Railways Budget 2010-2011. Ms. Mamata Banerjee, Railway Minister, presented a Rail budget, preferring Social Responsibility over Economic viability for taking up of the projects and aims for Inclusive
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growth and expansion of rail network for development of the country. The budget focused on providing security and basic facilities for passengers. It spelled concessions, on freight rates for food -grains & kerosene, and on passenger rates for certain passenger types. The budget gave feel good initiatives for next decade. Overall, the budget was in line with the expectations of no hike in passenger fares, but against the expectations of reforms in freight tariff which was widely expected.

Scope
1. This project covers the history of Railway Budgeting in India, the process of Railway Budgeting right from realising the need till presentation of the budget in the parliament.

2. Towards the end it covers the gist of the Railway Budget 2010 -2011 and certain financial facts of the same.

Limitations
1. Proper information regarding the history of Railway Budget and process of Railway Budget is not available readily in the market. The book of Railway Budget is available only with the Railway Board, New Delhi. 2. Since the Railway Budget process is tedious and also involves many parliamentary actions, even Railway authorities are not fully aware of the procedure. 3. Certain terms have been deliberately avoided in this project so as to make it easy to understand.

Objective
1. To study the outline of Budget planning in Indian Railways. 2. To understand the history of Railway Finance. 3. To understand and appreciate the Effective planning, decision making and forecasting mechanism in Indian Railways.
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Methodology

1. For primary data, direct interactions with certain Railway Authorities were used. 2. Secondary data was obtained from referring books and websites.

1. Indian Railways
Indian Railways (Hindi: Bh rat ya Rail), abbreviated as IR (Hindi: ..), is the state-owned railway company of India, which owns and operates most of the country's rail transport. It is overseen by the Ministry of Railways of the Government of India. Indian Railways has more than 64,015 kilometres (39,777 miles) of track and 6,909 stations. It has the world's fourth largest railway network after that of the United States, Russia and China. It is one of the world's largest commercial or utility employers, with more than 1.6 million employees. The railways traverse the length and breadth of the country and carry over 20 million passengers and 2 million tons of freight daily. IR owns over 200,000 (freight) wagons, 50,000 coaches and 8,000 locomotives.

2. History of Railways in India

The core of the pressure for building railways in India came from London in 1840s. For a century there after the basic policies and ultimate management of the Indian Railways were issued from London. The British built railways in India in order to intermesh the economies of the two countries. The building of railways in India brought about unintended as well as hoped for consequences in economic, political and military front. The new railways tied the different parts of India together more closely than ever before. The first proposals for construction of railways in India were presented in 1844 to East India Company in London by (a) East Indian Railway (EIR) company which was headed by R. McDonald Stephenson, and (b) Great Indian Peninsula Railway
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(GIPR) company. George Stephenson the great British Locomotive inventor was one the first Directors of GIPR and his son Robert Stephenson was appointed as the consulting engineer based at London.

Both E.I.R. and G.I.P.R were incorporated in England for the purpose of constructing railway lines in Calcutta and Bombay presidencies respectively. Though GIPR company was formed in 1844. George Stephenson could not see his Locomotives run on Indian soil as he died in 1848.

Some mention should be made of the role of Indian businessmen played in the early years. There were Indian merchants, both in Calcutta and Bombay who took an interest in funding of the railways. The most prominent of these was a remarkable Bengali merchant Prince Dwarkanath Tagore, grandfather of Nobel laureate poet Rabindranath Tagore. Dwarkanath's firm Carr, Tagore & Company is reported to h ave offered in 1844, to raise one-third of the capital required for a railway from Calcutta northwest to the coalfields above Burdwan. After Dwarkanath's premature death a few years later the other Indian businessmen played only a passive role. The concept ion, promotion and launching of India's railways were all by the British. By the year 1845, two companies were formed and the East India Company was requested to support them in the matter. The credit from the UK investors led to the hasty construction of a rail system over the next few years. On 22nd Dec' 1851, the first train came on the track to carry the construction material at Roorkee in India. With a passage of one and a half years, the first passenger train service was introduced between Bori Bunder (Bombay) and Thana on the
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providential date 16th Apr' 1853. This rail track covered a distance of 34 kms (21 miles). Ever since its origin, the rail service in India never turned back.

The British Government approached private investors and persuaded them to join the race with a system that would promise an annual return of 5% during the early years of operation. Once finished, the company would be transferred under the Government ownership, yet the operational control will be enjoyed by the original co mpany. In 1880, the rail network acquired a route mileage of about 14,500 km (9,000 miles), mostly working through Bombay, Madras and Calcutta (three major port cities). By 1895, India had started manufacturing its own locomotives. In no time, different kingdoms assembled their independent rail systems and the network extended to the regions including Assam, Rajasthan and Andhra Pradesh. In 1901, a Railway Board was formed though the administrative power was reserved for the Viceroy, Lord Curzon. The Railway Board worked under the guidance of the Department of Commerce and Industry. It was comprised of three members - a Chairman, a Railway Manager and an Agent respectively. For the very first time in its history, the Railways instigated to draw a neat profit. In 1907, most of the rail companies came under the government control. Subsequently, the first electric locomotive emerged in the next year. During the First World War, the railways were exclusively used by the British. In view of the War, the conditio n of railways became miserable. In 1920, the Government captured the

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administration of the Railways and the linkage between the funding of the Railways and other governmental revenues was detached. On the occasion of India's Independence in 1947, the maxim um share of the railways went under the terrain of Pakistan. On the whole, 42 independent railway systems with thirty-two lines were merged in a single unit and were acknowledged as Indian Railways. The existing rail networks were forfeited for zones in 1951 and 6 zones were formed in 1952. With 1985, the diesel and electric locomotives took the place of steam locomotives. In 1995, the whole railway reservation system was rationalized with computerization.

And now after 155 years, the Indian Railways is in a tremendous look out for growth with trains touching speeds as high as 130-150 km/h and prestigious trains like Rajdhani Express, Shatabdi Express, Duronto Express and the Sampark Krantis covering the length and breadth of the country. Many of the meter gauge tracks are being converted into broad gauge system, unelectrified sections are being electrified and single line sections are being doubled to transport more passengers and goods. The construction of Konkan Railway on the west coast part of India wa s one of the marvels of modern Indian Railways. This was a challenging task due to many mountains and rivers in between. Though it took 7 years to complete laying of tracks in the 760 odd kms stretch, but it reduced the travel time between Mumbai and Keral a by a great margin!

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3. Railway zones & their Headquarters

Indian Railways is divided for administrative convenience into several regional railways. Until recently there were 9 zones, and this structure had not changed much for four decades. Recently, 7 ne w zones have been created, giving a total of 16.

The nine older railway zones are:

y y y y y y y y y

Northern Railway (NR) North Eastern Railway (NER) Northeast Frontier Railway (NFR, sometimes NEFR) Western Railway (WR) Southern Railway (SR) South Central Railway (SCR) South Eastern Railway (SER) Eastern Railway (ER) Central Railway (CR) The 7 new zones are:

y y y y y y y

South Western Railway (SWR) North Western Railway (NWR) West Central Railway (WCR) North Central Railway (NCR) South East Central Railway (SECR) East Coast Railway (ECoR) East Central Railway (ECR)
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Konkan Railway (KR) is constituted as a separately incorporated railway, with its headquarters at Belapur CBD (Navi Mumbai), although it still comes under the control of the Railway Ministry and the Railway Board. It was proposed [12/04] to merge it with IR because of its financial situation with high debt. At present it consists of a single 760km route from Roha to Mangalore along the western coast of India (the Konkan region). The route is a single-line track and currently not electrified. It has been designed for high-speed traffic (160 km/h). It was open [5/99] to goods and passenger traffic. KR does not have divisions like the other IR zones, but it has two regions with headquarters at Ratnagiri and Karwar. The Ratnagiri region extends from Roha to Sawantwadi, while the Karwar region extends from Pernem to Thokur (the latter being where SR territory begins, a few stations north of Mangalore). Note: Although KR is currently single-line, KR and SCR lines run parallel from Majorda to Madgaon, making that section a double -line. The Calcutta Metro is owned and operated by IR, but does not belong to any of the zones; it is administratively considered to have the status of a zonal railway. Each zonal railway is made up of a certain number of divisions, each having a divisional headquarters. The 9 older zones were split into 59 divisions in all. With the creation of new zones the divisions have also been reorganized, and new divisions have been created in 2002 (some came into effect in April 2003), bringing the total number of divi sions to 67.

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The divisional organization of the zonal railways is as follows: 1. New zones that started in April 2003

Zone

Headquarters

Divisions

East Coast Railway (ECoR)

Bhubaneswar

Khurda Road, Waltair, and Sambalpur divisions of SER Bangalore and Mysore divisions of SR, reorganized Hubli division of SCR, including Hospet-Toranagal. (Earlier constituted to have Guntakal division of SCR as well.) Jabalpur and Bhopal divisions of CR, reorganized Kota division of WR Reorganized divisions: Allahabad of NR, Jhansi of CR, and new Agra division Nagpur division and reorganized Bilaspur division of SER, new Raipur division

South Western Railway (SWR)

Hubli

West Central Railway (WCR) North Central Railway (NCR) South East Central Railway (SECR)

Jabalpur

Allahabad

Bilaspur

2. Old zones as they are after April 2003

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Zone

Headquarters

Divisions

Western Railway(WR)

Mumbai

Central Railway (CR)

Mumbai

Eastern Railway (ER) Southern Railway (SR)

Kolkatta Chennai

Northern Railway (NR)

Delhi

North Eastern Railway (NER)

Gorakhpur

Bhavnagar and Mumbai divisions, reorganized Ratlam, Rajkot and Vadodara divisions, new Ahmedabad division Bhusawal and Nagpur divisions, reorganized Mumbai CST and Solapur divisions, new Pune division (including Pune-Kolhapur) Howrah, Malda, Sealdah, and Asansol divisions Chennai, Palghat, Tiruchirapalli, Thiruvananthapuram, and Madurai divisions, Salem division has been carved out of Palghat and Madurai divisons. Ferozpur, Ambala, Lucknow and Moradabad divisions, reorganized Delhi division Lucknow and Varanasi divisions, reorganized Izzatnagar division Reorganized Secunderabad, Hyderabad, Guntakal (including Bellary-Guntakal (MG) and BellaryRayadurg), and Vijayawada divisions, new Guntur and Nanded divisions. Kharagpur division, reorganized Adra and Chakradharpur divisions, new Ranchi division Katihar, Lumding, Tinsukia divisions, reorganized Alipurduar division, new Rangiya division

South Central Railway (SCR) Secunderabad

South Eastern Railway (SER) Kolkata

Northeast Frontier Railway (NFR)

Guwahati

3. New zones that were created in 2002

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Zone

Headquarters

Divisions

North Western Railway (NWR)

Jaipur

East Central Railway (ECR)

Hajipur

Jodhpur division and reorganized Bikaner division of NR, reorganized Jaipur and Ajmer divisions of WR Sonpur and Samastipur divisions of NER, Danapur, Mughalsarai, and Dhanbad divisions of ER. (Was earlier constituted to have Katihar division of NFR as well.)

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4. Budget
A budget (from old French bougette, purse) is a list of all planned expenses and revenues. It is a plan for saving and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures i.e. construct a model of how our business might perform financially speaking if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast.

5. Railway Budget

Effective planning & decision making is essential to every organisation. It leads to proper allocation of resources, manpower & funds for the required purpose at the right time.Planning is not a days job and should take place at the grass root level. Planning should not be done in haste. It should be done systematically with relevant facts & materials from the previous years. Plans should be made aware to every member of an organisation so that everyone is aware of the organisations targets & goals. Indian Railways in one such organisation. Planning & decision making is of utmost importance here also. Indian Railways is the largest

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employer in the world and is spread across the length & breadth of the country. So one can really imagine how planning & decision makin g is essential as it involves sanctioning & handling huge amount of capital for many projects. Railways dont simply mean running trains on the track, issuing tickets to passengers etc. Railways have various departments managing various activities right fr om lying of new tracks, maintaining the tracks, amount of coaches, wagons & locomotives to be manufactured in a financial year till studying the feasibility of complex projects. And planning these things takes lot of days and requires the assistance of experienced people who can plan effectively & efficiently. If certain plans are finalised, then the work for fulfilling these plans should be undertaken for which proper allocation of resources is to be done. All these things are presented to the Parliament o f India every year as the Railway Budget by the Railway Minister of India heading the Ministry of Railways. In the following pages of this project we will go through the history of railway budgeting and the process and roles of railway authorities in preparing the railway budget.

5.1. History of Railway Budgeting in India

We all know that Railways was started in India during 1853 by the British. Nearly 50 years after 1853, there were 33 separate railway administrations operating over 41,000 kilometres. Of t hese, 4 were worked by the Government of India 5 by erstwhile Indian states & remaining 24 by railway companies.
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The non-government railways were operated under varying degrees of government supervision, their regulations & controls vested in railway branch of Public Works Department (PWD) of the Government of India. The department was headed by an officer of Indian Civil Service, who was a member of the viceroy & Governor general excecutives council. He was assisted in the railway branch by one secretary , three deputy secretaries, four under secretaries and 4 assistant secretaries. The entire railway system was divided into 7 circles. A team of consulting engineers and one government examiner of accounts were posted to each of these 7 circles.

In October 1901, the secretary of state for India in council appointed Sir Thomas Robertson, C.V.O as special commissioner for Indian Railways to enquire into and report on the administration and working of Indian Railways. In the report, Sir Thomas Robertson recommended setting up of railway board consisting of a President or chief commissioner and two other commissioners all of whom should have practical knowledge of railway matters. He also insisted that the board should be assisted by a secretary, a chief inspector of railways, the necessary number of ordinary inspectors and the requisite number of government auditors. These recommendations lead to a decision in early 1905 to abolish the railway branch of Public Works Department and to transfer the control of railway system to a railway board consisting of a chairman and 2 others.

The railway board assumed office in March 1905 being directly responsible to the government of India in department of commerce and
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industry and their staff included amongst others an examiner of accounts, redesignated in the following years as railway accounts officer. Later a separate post of accountant general, railways was created after abolishing the post of accountant general, PWD.

5.2. The Actworth Committee

One of the most important landmarks in railway finance was the report submitted by the Actworth Committee. The Actworth Committee aimed at separating the railway finance from the general finances of the government. Accordingly, a resolution was adopted by the Central Legislative Assembly on 20 th September, 1924 as a convention. This resolution provided for a separate railway budget and was known as separation convention. So therefore the railway budget was separated from the general budget and it is presented on both houses of the parliament separately ahead of the general budget. So every year, estimates of receipts and expenditure (cumulatively called the Budget) of railways are presented to the parliament by the railway minister of India.

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5.3. The consolidated fund of India

All receipts of railways from fees, taxes and all other sources get credited to the consolidated fund of India. No money can be withdrawn from the consolidated fund, except as per the procedure laid down in the constitution. Even the salary of staff cannot be taken from the station earnings as all these receipts become the part of the consolidated fund of India.

5.4. Demand for Grants

The estimates of expenditure are to be presented in the form of Demand for Grants to the Lok Sabha. The railway budget total ly involves 16 demands. The parliament then discusses the details of each of demand and the members have the right to propose motions for token cuts in the amount asked for in the demands. Cut motions are motions to reduce the amounts for demand for grants. The object of a cut motion is to draw the attention of the House to the matter specified therein. After the process of demand for grants, the request for the total amount of money to be appropriated from the consolidated fund of India to meet the railw ay expenses is presented to the parliament in the form of Appropriation Bill (Railways). Once this Bill is passed and is signed by the President of India, it becomes the Act. Only after this and withdrawal from the consolidated fund of India is possible during the financial year. So therefore it is
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necessary that the entire parliamentary procedure of passing the budget is completed before 31 st March.

The following table explains various demands under Demand for Grants:

Number of demand 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Particulars of the demand

Railway Board Miscellaneous expenditure General Superintendence and Services Repairs and Maintenance of Way and Works Repairs and Maintenance of Motive Power (Locomotives) Repairs and Maintenance of Carriage and Wagons Repairs and Maintenance of Plant and Equipment Operating Expenses- Rolling Stock and Equipment Operating Expenses- Traffic Operating Expenses- Fuel Staff Welfare and Amenities Miscellaneous Working Expenses Provident Fund, Pension and other Retirement Benefits Appropriation to Funds Dividend to General Revenues, Repayment of loan taken from General Revenues and Amortization of over-capitalization Assets-Acquisition, Construction and replacement.

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5.5. Budget planning (process)

Budget process starts at once after realising all the needs and thereby making subsequent plans for the needs. Each railway zone will have its own needs right from a smaller one to a very big one. The need or a requirement is realized by the filed officer through passenger complaints/suggestions, through maintenance engineers or by himself. Maintenance engineers are present at every 100 kilometres across the length and breadth of the country. Based on their observations and requirements of passengers, they communicate the need to the filed officer. The filed officer then analyses the need or the requirement and depending upon the amount he may himself sanction it or may forward it to Divisional Railway Manager (DRM) or General Manager (GM). In Indian Railways, planning for the budget 2 years hence starts in advance. For e.g. process and planning for the railway budget 2012 2013 starts from 2010-2011. So for the budget recently presented for the financial year 2010-2011, the planning and process would have started in 2008-09. If the amount of a work exceeds Rs. 5 crores, then it may be sent to the railway board for sanctioning. If the amount exceeds Rs. 50 crores, then it is referred to the Planning Commission for further approval. All the works costing above Rs. 2.5 crores are published in the Pink Book of Railways. The entire responsibility for framing the estimates devolves upon the spending/earning authorities concerned, though the actual work of
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compilation and scrutiny would rest with the Financial Adviser and Chief Accounts Officer who would draw the attention of the General Manager to matters of purely financial import. The estimates should be as accurate as possible and to achieve this object care should be taken to see that data on which the forecast is made is adequate and reliable and that the conclusions arrived at from the data can be sustained by past experience and future expectations of likely events. The proposal of works of new lines, gauge conversion, doubling and electrificat ion are initiated at the railway board level. Railway zones do not propose these works. Railway zones prepare the works program on the basis of ceilings and norms communicated by the railway board. A table below gives an idea about the schedule of the budget process and planning.

ACTIVITY Prior approval of the board. Ceiling advised. Preliminary works program Works program- Advisors meeting Full board meeting Budget Presentation

DATE 30th June April September November-December December-January February

On the basis of the proposals of works sent by various railway zones, the railway board scrutinises the proposals and depending upon the work, it may or may not sanction the amount. If the railway board sanctions the amount, it is understood that the board is satisfied with the proposal and completion of the work. Sometimes the railway boards estimation may differ with the zonal railways estimate of the work and if the zonal
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railway estimate is more than the boards estimate, the railway board will sanction the amount as estimated by the railway board. In cases where the railway board does not accept a proposal and does not sanction the amount for the same, the railway board will communicate with the respective zonal railway and convey them why it was not sanctioned. And if the zonal railway feels that the particular work which was not sanctioned is of utmost importance, then it can communicate with the railway board again and explain the board the importance of that particular work for which the railway board refused a sanction.

For the preparation of Budget by the railway board, the railway administration and other authorities empowered to incur expenditure are required to submit to the railway board their revised estimates for the current year and budget estimates for the ensuing year. The revised estimates are required in respect of the current year and the budget estimates for the following year. Revised estimates are required where the estimates are already sanctioned and already the works are executed or which are in progress. These require revision due to change in the scope of work while execution and requires to incorporate all those scope into sanctioned estimate.

There is a beautiful system in Indian Railways through which the expenditure required for next year will be assessed and the accumulated cost from all the zones will be decide for next years Budget.

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The revised and estimate budget should be framed by the various concerned authorities in keeping with the instructions given below:

1. Gross Receipts 2. Ordinary Working Expenses 3. Payment to Worked lines 4. Appropriations to and expenditure to be met out of Railway Funds 5. Payment to General Revenues 6. Works Expenditure 7. Civil Estimates

5.5.1. Gross Receipts

The estimates of Gross Receipts should be prepared in quadruplicate in the prescribed form and the figures to be mentioned in thousands of rupees. Gross Receipts includes Coaching Earnings, Goods Earnings, and Sundry Other Earnings etc. These are the earnings from each class of passenger traffic, commodities carried, catering etc.

5.5.2. Ordinary Working Expenses

These are the expenses incurred on operations, repairs, maintenance, fuel, staff welfare, staff benefits etc. The Railway Board should be
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furnished with the summary of the ordi nary working expenses comparing, under each demand, the actuals during each of the preceding three years, with budget estimates and revised estimates for the current year and budget estimates for the ensuing year.

5.5.3. Appropriations to and expenditure to be met out of Railway Funds

It comprises various Railway Funds which are budgeted whether for appropriations to or expenditure from the funds. These include Depreciation Reserve Fund (DRF), Revenue Reserve Fund (RRF), Development Fund (DF), Pension Fund and Accident Compensation, Safety and Passenger Amenities Fund (ACSPF). These funds are financed from internal sources of railways except where in the absence of adequate revenue surplus, temporary loans have to be obtained from the General Revenues to meet the obligations of Development Fund and Revenue Reserve Fund. Except in case of Pension Fund and Accident Compensation, Safety and Passenger Amenities Fund for which revised and Budget estimate are prepared by and appear in the Budget statements of the individual Railway Administration. The responsibility of framing the revised and budget estimates for other railway funds lies with the Ministry of Railways. A brief explanation of these funds is given below:

1. Depreciation Reserve Fund (DRF):

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Since Indian Railways is not subject to income tax, they put depreciation amount in a reserve fund called the Depreciation Reserve Fund. Indian Railways uses this money for meeting the cost of replacement and renewals of depreciated assets. It was set up in 1924.

2. Revenue Reserve Fund: Revenue reserve fund if left over after payment to the General Reserve is added to the Revenue Reserve Fund. If no surplus is available, then temporary loans are obtained from General Revenues.

3. Development Fund (DF): It was started in 1946 as Betterment Fund and was renamed as Development Fund from 1950. It finances the cost of amenities for passengers and also for labour welfare.

4. Pension Fund: It is another reserve fund in which Indian Railways contribute a large amount every year. It was started in 1964.

5.5.4. Payments to General Revenues

It arises in respect of dividend on Capital -at-charge, contribution for grants to States in lieu of passenger fare tax, repayment of loans and
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interest borrowed on a temporary basis from General Revenues to finance Development Fund and Revenue Reserve Fund. Capital-at-charge is given by the General Exchequer through Central Governments Budget for which Railway have to pay interest which is termed as dividend.

5.6. Compilation and scrutiny of budget in the Railway Board

The estimates of working expenses are subject to critical examination by the Railway Board and after taking all the relevant factors into consideration, the Railway Board prepare their own estimate of expenditure. The procedure adopted by the Railway Board in fixing the allotment for each railway is as follows:
y The revised estimate for the current year is first fixed under each

demand for each railway after taking into the account the expenditure for the preceding year and comparing the expenditure for the first seven months of the current year with the corresponding period of the previous year.
y Having thus fixed the revised estimate for the current year, the budget

estimate for the next year is prepared on a consideration of special circumstances so far known for both years.

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The estimate of expenditure on rolling-stock, plant and machinery, structural and other engineering works submitted by the railways after having been carefully examined by the Railway Board as to the necessity and justification of the works there in are discussed with the railway administration and the work to be undertaken during the budget year be decided upon.

5.7. Submission to the Minister

The estimated amount required for Plan expenditure during the next year is intimated to the Planning Commission/ Ministry of Finance for necessary provision being made in the Way and Means budget of the Government of India and after it has been ascertained from Planning Commission. The rolling stock and plant and machinery programmes, as approved by the Minister, are subject to further modifications which may subsequently necessary due to the following cause:
y If any item of rolling stock and plant and machinery ordered for delivery

in the current year is not delivered before the end of the year and remains unpaid , it becomes necessary to provide money in the programme for the next year for such items as will be delivered in that year.

Of the proposed modifications, the important ones, if any, are however, specifically brought to the notice of the Minister before presentation of the budget to the Parliament. The estimates of working expenditure as fixed by the Railway Board each railway and those of expenditure on
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works, plant and machinery and rolling stock as finally settled are consolidated under the respective Demand for Grants and submitted to the Minister before presentation to the Parliament.

5.8. Presentation to the Parliament

The complete Budget which includes the Demand for Grants and detailed estimates of each railway along with a summary will be presented to the Lok Sabha and Rajya Sabha by the Railway Minister. Before the Demand for Grants are submitted to the Parliament, the recommendations of President should be obtained.

5.9. Appropriation Bill

After Demand for Grants have been voted in the Lok Sabha, there shall be introduced a bill to provide for the Appropriation out of the Consolidated Fund of India of all money required to meet the grants so made by the Lok Sabha and the expenditure, if any, charged statement previously laid before the Parliament. The Appropriation Bill as passed by the Parliament and assented to by the President forms the basis of budgetary allocation to the railways.

5.10. Administering the Budget

Distribution of funds by the Railway Board

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The Grants as voted by the Parliament and the appropriation for the charged expenditure as sanctioned by the President are distributed by the Railway Board among the Railway Administrations and other authorities subordinate to them, as soon as possible, after the Budget is sanctioned. The sums so distributed are called "Allotments" and the orders by means of which the allotments are made are called "Budget Orders". The allotments made out of fun ds voted by the Parliament are shown as "Voted" and those fixed by President are shown as "Charged". The Budget allotment made to a railway administration is intended to cover all charges, including the liabilities for past years, to be paid during the yea r or to be adjusted in the accounts for it. It shall be operative until the close of the financial year. Under the 'doctrine of lapse', any unspent balance shall lapse and shall not be available for utilization in the following year. When the Budget Orders issued by the Railway Board show any reduction in the estimates originally submitted to them, prompt measures should be taken by the railway administrations to limit the expenditure to the amounts allotted and distributed by the Railway Board.

Distribution of funds by the General Managers to Lower Authorities

A General Manager is expected to take steps immediately to distribute the funds, placed at his disposal, to authorities subordinate to him in such manner as he may consider most suitable, provided that the total of the sums so allocated does not exceed the total of the grant placed at his disposal. In making this initial distribution, he may, at his discretion keep a sum unallotted as a reserve for emergencies that may arise in future. He may also vary the initial distribution as necessity arises
33

during the course of the year. The authorities to whom funds are distributed by the General Manager may, subject to any general or special instructions issued by him, redistribute the fund placed at their disposal to the authorities under them. No expenditure shall be incurred by an authority without the allotment of necessary funds. The authority to whom the funds are allotted, shall be responsible to report at once to the next higher authorities the probability of any lapses or excesses over the sums placed at their disposal. The expenditure on each work shall be limited to the sum allotted for it. If for exceptional reasons, expenditure in excess of Budget allotment has to be incurred and if the authority incurring the expenditure is either not in a position to fin d funds by reappropriation or is not empowered to sanction a reappropriation therefore, application for additional funds shall be made to the next higher authority stating how the expenditure is proposed to be met. The transfer of funds, originally assigned for expenditure on a specific object to supplement the funds sanctioned for another object is called "Reappropriation". In doing so it should invariably be explained why the need for the expenditure was not foreseen in time for inclusion in the budget and why the outlay cannot be postponed to the next financial year.

5.11. Responsibility of Railway Administration in case of Excess or Lapse

The railway administrations shall be responsible to ensure that no expenditure is incurred in excess of the Budget allotments made to them. Should it become apparent at any time that the grant for the year is likely to be exceeded from any cause whatsoever , the General Manager
34

should report the position to the Railway Board and apply for additional funds. No liability may be incurred in one year against anticipated grants of a succeeding year. It shall also be the duty of the administrations to see that the allotments made to them are fully expended, in so far as is consistent with economy and the prevention of large expenditure in the last months of the year for the sole purpose of avoiding lapses. They shall be responsible for ensuring that money which is not likely to be needed during the year is promptly surrendered so as to allow of its appropriation for other purposes.

5.12. Powers of Railway Administrations in case of emergent and inevitable expenditure

In certain cases where the commencement of wor k is urgently necessary to safeguard life or property or to repair damage to the line caused by flood, accident, earthquake or other unforeseen contingency, so as to restore or maintain through communication may be authorized by the Executive Engineer; but he should at once submit a report through the usual channel to the authority competent to give administrative approval to the work and to allot the required funds. Expenditure to meet a sudden increase in traffic or for ensuring the safe operation of traf fic may be incurred with the personal sanction of the General Manager in anticipation of the allotment of necessary funds by the Railway Board provided that the Financial Adviser and Chief Accounts Officer concurs. This power cannot be delegated and can be exercised by the General Manager only where the expenditure is within his powers of sanction. In
35

all cases where this requires an allotment of additional funds, a report showing the expenditure involved and the additional funds required should be submitted to the Railway Board, as soon as possible.

5.13. Powers of the Railway Board

Within the amount of a grant as voted by the Parliament, the Railway Board have full power of transferring the provision from one sub-head to another by a formal order of reappropriation, but reappropriations from one grant to another are not permissible. Under Grant No. 16 no reappropriation of funds is permissible between Capital, Railway Funds and Revenue even though reappropriation is permissible between the various sub-heads of grant viz. the various Plan heads. As regards "Charged" expenditure, there are no restrictions on the powers of the Railway Board to transfer provision from one sub-head to another by a formal order of reappropriation, but no reappropriation is p ermissible from one grant to another or from "Charged" heads to "Voted" heads or vice versa.

5.14. Powers of the Railway Administration

Reappropriations, other than those which require prior board approval may be sanctioned by the, railway administration s but no

reappropriations are permissible after the close of the financial year, i.e., 31st March. The reappropriations by railway administrations should not be, made haphazardly on the basis of individual items of expenditure where the original provision is exceeded, not should they be postponed to be made only towards the end of the year. The railway Administrations should review the position as a whole at intervals and
36

carry out the necessary reappropriations. When funds have to be provided for new expenditure under one of the sub-heads and the administrations are definitely in a position to transfer the grant from another sub-head for this purpose, the appropriations should be made promptly. The whole object is to ensure that, as far as possible, funds which are not required are withdrawn from disbursing officers as soon as it is definitely known that they are not required, and incidentally to provide that any really unavoidable expenditure is met from such savings as far as possible.

5.15. Unforeseen Expenditure- operation from the Contingency Fund of India

Unforeseen expenditure which cannot be met by reappropriation from the existing grant and expenditure on a New Service /New Instrument of Service " not contemplated in the budget, shall be met from out of the balance in the Contingency Fund of India placed at the disposal of the Financial Commissioner for Railways. New Works estimated to cost more than Rs.50 lakhs each are treated as New Service/New instrument of Service. Likewise, relatively large expenditure arising out of important expansion of an existing activity is treated as New Instrument of Service, which is a slight variant of the term New Service. Applications for advances required by the Railways shall be made to the Financial Commissioner for Railways giving the following particulars: -

1. Brief particulars of the additional expenditure involved; 2. The circumstances in which provision could not be included in the Budget;
37

3. Why its postponement is not possible; 4. The amount required to be advanced from the fund with full cost of the proposal for the year or part of the year, as the case may be. So in these ways the various activities for making a budget are exercised by various authorities. As seen right from bottom level till the top level employees are involved in preparing the budget which is presented in the Parliament by the Railway Minister.

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6. Gist of Railway Budget 2010-2011

The Indian Railways Budget for the year 2010-2011 was presented in the parliament by the Railway Minister Kumari Mamta Banerjee on 24 th February 2010.

The following are the key highlights of the above said budget.

1. Kumari Mamta Banerjee spelt out the Vision 2020 of Indian Railways which was as follows:

Indian Railways shall provide efficient, affordable, customer-focussed and environmentally sustainable integrated transportation solutions. It shall be a vehicle of inclusive growth, connecting regions, communities, ports and centres of industry, commerce, tourism and pilgrimage across the country. The reach and access of its services will be continuously expanded and improved by its integrated team of committed, empowered and satisfied employees and by use of cutting-edge technology.

This vision is to be realised in a decade i.e. in 10 years from the year 2010. The vision clearly suggests that with the assistance of latest technologies, the Railways are on a tremendous look out of growth and wishes to expand to every corner of India.

2. The budget further tells that in 1950, the route kilometres of Railways in India was 53,596 kilometers and now after a span of 58 years the
39

Railways has reached only 64,015 kilometers which says that on an average the Railways has added only 180 kilometers every year. Referring to this figure, the budget ur ges that the Railways needs to move faster adding more route-kilometers each year to connect people and places across the nation. Of course this is in realisation of achieving the Vision 2020 by the year 2020 where the target is to add 25,000 kilometers in the coming decade. So this is a path breaking step by the Railways where they are planning to complete 1000 kilometers of new lines every year as compared to the average 180 kilometers.

3. The budget further emphasises the need of business community to joi n hands with Railways to build partnerships. It says that this has not happened these many days due to administrative and procedural delays which discourage investors. It further adds to say that the Railways have decided to set up a special task force to clear proposals for investments within 100 days. The policy guidelines will be made easy, simple and investment friendly.

4. Financial powers of field officers have been increased for quick execution of works. The Railways are projected to spend a record Rs. 1,302 crores in 2010-2011 on passenger amenities. This is a quick move as far as the Railways is concerned because if their financial powers are increased, they dont have to expect money every time from their seniors and it can save good amount of tim e.

5. 94 stations are decided to be upgraded as Adarsh Stations. Also 10 more stations are identified to be converted to world class stations. The Railways also aim to provide modern trolleys at all important stations to
40

be handled by uniformed attendants for senior citizens and ladies. Air space at various stations will be used for construction multi -levelled parking complex.

6. To cater bottled clean drinking water to the 1.8 crore passengers, the Railways have proposed to set-up 6 bottling plants at different parts of the country. These will be available at cheaper rates.

7. The Railways propose to induct e-ticket based mobile vans for issuing reservation tickets in government medical college hospitals, High Courts, Districts Courts, university campuses, IT hubs, IITs and IIMs. To give more facilities to the common people, Railways also propose to open ticket centres at district headquarters and village panchayats with infrastructure support from local government/semi government

authorities and private organizations.

8. The budget says that safety and security never sleeps and zero tolerance for accidents is our mission and vision. It states that Indian Railways is very vast as it is spread over 63,000 kilometers and operates 17,000 trains daily and in such a vast operation due to sabotage, weather, technical problems, rail roko, natural disaster and human error unfortunately precious lives are lost. It also says that Railways truly care for everyones safety. To address this issue, the Railways will adopt twin strategy- highest level of technology and pressing into force well trained manpower.

41

9. The Railways will go in for cutting edge technology to prevent accidents. Anti-collision Device and Train Protection Warning System (TPWS) are two such devices which can help the Railways. ACD has already been installed on NF Railway and will be soon extended to three more zonal railways. TPWS covering 828 kilometers will be implemented this year.

10. The budget further adds that the Railways are also developing crashworthy coaches and locomotives and will provide automatic fire and smoke detection system in some long distance trains.

11. The Railways are deeply concerned about unmanned level crossings and in the coming five years the Railways are planning to man all the unmanned level crossings. As a part of this, 1000 unmanned level crossings will be taken up for this year.

12. Security of women passengers will be improved by raising 12 companies of women RPF. These will be named as Mahila Vahini Priority will be given to women from minority, SC/ST and economically backward category.

13. As a part of health measures, the Railways are planning to set -up Outpatient departments and diagnostic centres, secondary -level general speciality hospitals and tertiary-level multi-speciality hospitals at various places across the country. This is with regards to the MoU signed by the Railways with the Ministry of Health.

42

14. Indian Railways proposed to run the Commonwealth Exhibition train to spread the awareness of the Commonwealth Games to be held in Delhi.

15. To fulfil Railways CSR objectives, Kumari Mamta Banerjee proposes to extend the Rashtriya Sawasthya Bhima Yojana to all licensed porters, vendors and hawkers who are from unorganised sector and socially challenged.

16. On the context of training, the budget states that to strengthen the skills and abilities of loco pilots, a state-of-the-art advanced loco pilot training centre is proposed to be set up at Kharagpur. It is also proposed to open an advanced railway track training centre at Beleghata for training of gangmen and gatemen. The railways will also set up four multidisciplinary training centres at Cuttack, Coochbehar, Malda and Jabalpur.

17. The budget states says that the Railway Minister is not happy with the functioning of RDSO i.e. Research, Design and Standards Organisation and she wishes to revamp it so as to bring it in line with modern research organisations.

18. A Centre for Railway Research is proposed to be set up in Indian Institute of Technology, Kharagpur for research in key areas of railway technology and to give a thrust to indigenisation. A Memorandum of Understanding (MoU) has already been signed with IIT, Kharagpur on

43

13th February 2010. Railways will establish strong research partnerships with premier institutes like IITs, NITs, CSIR and DRDO.

19. The Railway Minister proposes to increase the capacity of Chittaranjan Locomotive Works (CLW) from 200 locomotives to 275.

20. To overcome the shortage of railway coaches, steps are being taken up to set up new coach factories at different parts of the country. The Railways also plan to develop special coaches for senior citizens and the physically challenged. In addition to these the Integral Coach Factory at Permabur will be expanded and modernised to increase the production of railway coaches.

21. The budget states deep concern on the suicides of many farmers across the country. Produce worth over Rs, 35,000 crores perish every year. To address this issue, Railways have decided to lend a shoulder to the farmers. The Railways have propsed to set up a refrigerated container factory. Also will initiate Kisan Vision Project to be implemented in six locations.

22. The Railways have initiated the following for the freight business:

y Railways will introduce a modified wagon investment scheme for high

capacity general purpose and special purpose wagons. It will also cover iron ore, coal and cement.

44

y A policy to permit private operators to invest in infrastructure, on the

lines of container train operators, and run special freight train for commodities such as automobiles, vegetable oil, molasses, chemicals and petrochemicals and bulk traffic like fly ash and cement

y Taking further the concept of mega -logistics hubs announced in the last

Budget, Railways have decided to set up automobile and ancillary hubs at 10 locations. The first such auto hub has been launched.

y The roll-on-roll-off service which Kumari Mamta Banerjee announced

as Railway Minister in 2000 is now proposed to be extended to zonal railways in a phased manner.

y In order to provide multi-modal door-to-door service to our freight

customers, one rake of road-cum-rail vehicle will be introduced on trial basis.

y A premium tatkal service for parcel and freight movement is under

consideration.

y Railways will also examine the need for special wagons for iron ore, fly

ash, automobiles etc.

23. Railways have been socially and environmentally responsible. Steps taken by Railways include distribution of 2.6 CFLs and setting up of 10 eco-parks.

45

24. The Railways propose to introduce green toilets in at least 10 rakes. They also propose to install on diesel locomotives a GPS-based optimised driver guidance system which has shown 8 -10% saving in fuel consumption.

25. The Railways also propose to set up Rail Eco-parks to conserve, protect and promote Railways wetlands and forests. Ten are planned for this year.

26. Construction of high speed passenger rail corridors is another transformational initiative that Railways will embark upon in the coming years. Indian Railways propose to invest in developing high speed corridors of 250 to 350 kmph speed. Already six corridors have been identified. These projects would require large investments and will be executed through PPP mode. The budget also proposes to set up National High Speed Rail Authority for planning, standard setting, implementing and monitoring these projects.

27. Railways have already initiated an accounting r eforms project that would enable it to move over gradually to an accrual based accounting system. On completion of this project, a road map for future will emerge enabling phased migration to a new accounting system within the broad framework as envisaged by GASAB (Government Accounting Standards Advisory Board).

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28. National Projects:

y Railways propose to draw up a Master Plan for the development of rail

infrastructure in the Northeast region in consultation with the Northeast Development Council and the state authorities concerned.

y On completion of the Quazigund-Anantnag section of Quazigund-

Baramulla rail line in Kashmir Valley, train services were introduced from October 28, 2009. After review by the Expert Committee, work on Katra-Quazigund section has restarted. Priority is being given in construction of balance portion of the line from Udhampur to Katra and Katra to Quazigund.

y In the northeast, ten projects have been declared as National Projects

and adequate funds are being provided. The progress on some of the projects is getting affected by adverse law and order condition. However, Lumding-Silchar gauge conversion project has been given special priority for expeditious completion.

y The work of Byrnihat-Shillong has also been included in this Budget as

a National Project for providing rail connectivity to the capital of Meghalaya.

29. Government is giving priority in providing rail connections to the neighbouring countries. Surveys for the five new lines have been conducted for rail connectivity wit h Nepal.
47

30. 800 km has been fixed for Gauge Conversion in 2010 -11.

31. The target for doubling of 700 km has been fixed for 2010 -11.

32. In order to promote industrial activity, the State Governments and the Centre are giving thrust on the development of the ports. Ports are expected in the States of Gujarat - Porbander, Sutrapada, Dholera, Mahuva, Hazira, Tuna; Maharashtra - Revas, Dharamtar, Dighi; Karnataka Karwar; Kerala - Azhikkal, Beypore, Thalassery; Orissa Astranga, Chudamani, Gopalpur; Andhra Pradesh - Vodarevu,

Nizampatnam; West Bengal Sagar Kapil Muni, Haldia. Railways will welcome participation under PPP for providing rail connectivity to such ports.

33. Indian Railways already has a network of 37,000 kms of optic fibre cables and work on adding another 12,000 kms is in progress. The balance 15,000 kms is proposed to be taken up through PPP route, thus covering the entire railway network. It is also proposed to utilise this OFC infrastructure to extend broadband services with last mile connectivity on PPP basis to urban and rural areas.

34. Kolkatta Metro is the only metro under Indian Railways. Railways are proposing new routes on this metro system.

35. To mark the 150th birth anniversary of Kabiguru Rabindranath Tagore and to disseminate his legacy to the young generation, Railways propose
48

to run a special train Sanskriti Express - across the country. Tagore is the only poet in the world whose poems have been adopted as National Anthems by two countries Amar Sonar Bangla for Bangladesh and Jana Gana Mana for India. Tagore lived and produ ced many of his literary jewels in undivided Bengal. In homage to this great savant and to strengthen the matre between Bangladesh and India, it is proposed to run a special train in consultation with the Government of Bangladesh across the border so that the two countries share the opportunity of celebrating the 150th birth anniversary jointly.

36. Mothers nurture the future generations of the country and we take pride that they have now stepped out of their houses to make contributions as a workforce in the country. In order to improve their travel on rail, Railways have introduced 21 ladies specials on the railway network in major cities of Kolkata, Chennai, New Delhi and Mumbai. In recognition of their role in the Nations destiny, Railways have named these trains Matribhoomi specials.

37. Railways propose to introduce unreserved Karmabhoomi trains for the common man.

38. The country is proud of our men in uniform who protect our borders under very difficult conditions. For a very long time there were no rai l connections among different cities in the western sector. The infrastructure development by the railways by way of gauge conversion and new line works has now facilitated a direct connectivity. The

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Railways, therefore, dedicate a new express train servic e, Janmabhoomi, between Ahmedabad and Udhampur every week.

39. To support governments effort of promoting tourism in our country, Railways will launch special tourist trains called Bharat Tirth connecting popular tourist sites in different parts of the country - from the Himalayas to Kanyakumari, from Dwarka to Vindhya Parbat, from Ajmer Sharief to Gangasagar and from Madurai to Patna Sahib. The running of Bharat Tirth is to emphasise our Unity in Diversity and will bring to reality Kabigurus words in our National Anthem: Punjaba Sindhu Gujarat Maratha Dravida Utkala Banga Vindhya Himachala Yamuna Ganga

40. For the first time in our history, a new train service called Duronto was introduced. These provide non-stop point to point services between cities offering large volumes of traffic. This service is cheaper and faster compared to Rajdhani trains and has been very well received by the travelling public. The Railways propose to introduce more Duronto trains during this year.

41. Hardships are being faced by the common people by the high inflationary trend especially in food prices. Railways do understand their distress. Despite Railways own tight resource position, it announces a
50

reduction of Rs 100 per wagon in freight charges f or food-grains for domestic use and kerosene. This is a small gesture to express their concern.

42. The enormous contribution of the Indian film industry to the promotion of art and culture is known to all of us. There are people behind the screen whose contribution is not so well known to many of us. The Railways propose that technicians of regional film industry when travelling for film production related work will be eligible for 75% concession in Second Sleeper, 50% concession in First Class, AC Chair Car, AC 3-tier, AC 2-tier in all trains including Rajdhani/Shatabdi and Jan Shatabdis.

43. Railways at present grant a concession of 75% in 3 AC and Sleeper Class to cancer patients going for treatment, together with an escort. The Railways now propose to enhance this concession to cancer patients up to 100% in 3 AC and Sleeper Class.

44. Indian Railways provide the facility of issuing e-tickets, through IRCTC, by utilising internet services. At present, a maximum service charge of Rs 15 for Sleeper Class and Rs.40 for AC Class tickets is levied. The Railways propose to reduce the maximum limit of service charge to Rs.10 for Sleeper Class and Rs.20 for AC Class.

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45. As far as tariffs were concerned, the Railway Minister said in the present economic situation, when the country is about to return on a high growth path, I do not wish to impose any burden on the c itizens. Therefore, I do not propose any increase in the passenger fares of any class or category of trains. Similarly, I do not intend to increase freight tariffs. This statement of hers would have brought a sigh of relief to many people across the count ry!

46. Railways care for our 80,000 women employees. It is, therefore, proposed to set up 50 crches for children of women employees and 20 hostels. Railways will also provide more numbers of community centres and stadiums.

47. Highest ever annual plan outlay for 2010-11:

y Plan outlay at INR 414.26bn, an increase of INR 11.42bn over 2009 -10.

y Fund allocation of INR 44.11bn for new lines. y Fund allocation of INR 13.02bn for passenger amenities.

y Fund allocation of INR 10.01bn for Metro Projects.

y Additional budgetary support sought to the tune of INR 37.01bn for 11

National Projects.

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y Acquisition of 18000 wagons with proposal to set up five state -of-the-art

wagon factories in JV/PPP mode.

y Several projects being taken up on cost sharing basis with State

Governments and on PPP mode.

48. Financial Performance in 2009 -10:

y Loading target of 882 MT likely to surpass by 8 MT in 2009 -10. y Gross Traffic Receipts kept at INR 883.56bn, (+10.7%).

y Annual Plan outlay kept at INR 402.84bn.

49. Revised Estimates 2009-2010:

y The freight earnings have been increased to Rs 58,716 crore which is Rs

191 crore more than the budget estimates.

y Passenger earnings have been scaled down by Rs 252 crore to Rs 24,057

crore.

y Along with revised Other Coaching earnings of Rs 2,526 crore an d

Sundry Other earnings of Rs 2,982 crore, the total gross earnings has now been fixed at Rs 88,281 crore.

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y Gross Traffic Receipts have been reduced marginally from the Budget

Estimates of Rs. 88,419 crore to Rs. 88,356 crore.

y Ordinary Working Expenses have been raised to Rs 65,500 crore from

Rs 62,900 crore in the budget estimates 2009 -10.

y After providing for Rs 4,500 crore and Rs 13,440 crore towards

Depreciation Reserve Fund and Pension Fund respectively in the Revised Estimates, the Total Working Expenses are likely to be Rs 83,440 crore.

y After accounting for Miscellaneous Receipts of Rs 2,357 crore and

Misc. Expenditure of Rs 783 crore, Net Revenue of the Railways is now revised to Rs 6,490 crore.

y After meeting the full Dividend liability of Rs 5,539 crore, the Excess

comes to Rs 951 crore. This would be appropriated to Development Fund to meet the Plan requirement.

y To meet the shortfall in earnings and higher working expenses, the plan

expenditure has been regulated in such a manner as to ensur e that the progress of safety and other targeted works is not allowed to suffer. However, to achieve this, additional market borrowing of Rs.350 crore by the Indian Railway Finance Corporation would be necessary. With this the total market borrowings will increase from Rs. 9,170 crore to Rs. 9,520 crore.

y The revised plan investment is projected at Rs 40,284 crore including

the investment on National Projects.

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50. Budget Estimates for 2010-2011:

y The target for freight loading for 2010-11 has been kept at 944 MT, an

increase of 54 MT over revised estimates 2009-10.

y Freight throughput has been projected at 623 billion NTKM.

y Budget Estimates for freight, passenger, sundry other earnings and other

coaching earnings have been kept at Rs 62,489 crore, Rs 26,127 crore, Rs 3,171 crore and Rs 2,778 crore respectively.

y Gross Traffic Receipts have thus been projected at Rs 94,765 crore.

y Provision for Ordinary Working Expenses for 2010-11 has been kept at

Rs 65,000 crore which is Rs 500 crore lower than the Revised E stimates for 2009-10.

y Appropriation to Depreciation Reserve Fund has been increased from Rs

4,500 crore in Revised Estimates 2009-10 to Rs 7,600 crore. Appropriation to Pension Fund has also been kept at Rs 14,500 crore.

y Total Working Expenses will be Rs 87,100 crore and Net Revenue Rs

9,782 crore.

y After meeting the estimated Dividend liability of Rs 6,609 crore, the

projected Excess is Rs 3,173 crore with the targeted Operating Ratio of

55

92.3%. The Excess is proposed to be appropriated to Development Fund (Rs2,800 crore) and Capital Fund (Rs 373 crore).

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C B t ti t

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R i R il B
ll t i R

57

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Financial Statements:
Statement 1: Financial Results of Railways Items 2008-09 (Actuals) 2009-10 2009-10 (Budget (Revised Estimates) Estimates) 3 4 88,419 88,356 24,309 24,057 58,525 58,716 2,760 2,982 2,750 2,526 75 75 2,207 2,357 0 0 0 0 2,086 121 90,626 62,900 13,440 5,325 81,665 840 0 60 780 82,505 8,121 5,479 0 5,479 2,642 2,000 642 0 0 92.5 6.6 2,243 114 90,713 65,500 13,440 4,500 83,440 783 0 57 726 84,223 6,490 5,539 0 5,539 951 951 0 0 0 94.7 5.3 (Rs. crore) 2010-11 (Budget Estimates) 5 94,765 26,126 62,489 3,171 2,778 200 2,956 0 0 2830 126 97,721 65,000 14,500 7,600 87,100 840 0 60 780 87,940 9,781 6,608 0 6,608 3,173 2,800 373 0 0 92.3 6.9

1 2 Gross Traffic Receipts (a to e) 79,862 (a) Passenger Earnings 21,931 (b) Freight (Goods) Earnings 53,433 (c) Sundry Other Earnings 2,501 (d) Other Coaching 1,972 (e) Suspense 25 2. Total Miscellaneous Receipts (a to d) 1,797 a) Interest on Fund Balances 0 b) Receipts from Safety Surcharge on 0 Passengers Fares c) Subsidy from General Revenues towards 1,701 dividend relief & other concessions d) Other Miscellaneous Receipts 96 3. Total Receipts (1+2) 81,659 4. Net Ordinary Working Expenses 54,349 5. Appropriation to Pension Fund 10,490 6. Appropriation to Depreciation Reserve Fund 7,000 7. Total Working Expenses {4+5+6} 71,839 8. Total Miscellaneous Expenditure 645 a) Appropriation to Special Railway Safety Fund 0 b) O.L.W.R. (Open Line Works Revenue) 48 c) Other Miscellaneous Expenditure 597 9. Total Expenditure (7+ 8) 72,484 10. Net Revenue (3- 9) 9,175 11. a) Dividend Payable to General Revenue 4,718 b) Payment of Deferred Dividend 0 c) Total Dividend Payment (a+b) 4,718 12. Surplus [10-11(c)] 4,457 13. Appropriation to Development Fund 1,391 14. Appropriation to Capital Fund 3,066 15. Appropriation to Railway Safety Fund 0 16. Appropriation to Special Railway Safety Fund 0 17. Operating Ratio 90.5 18. Ratio of Net Revenue to Capital-at-Charge and 8.8 Investment from Capital Fund Source : Explanatory Memorandum on the Railway Budget, 2010-11. 1.

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Statement 1: Financial Results of Railways (Concld.) (Rs. crore) Items Variations Col.4 over Col. 3 Col.4 over Col. 2 Col.5 over Col. 4 Amount Per Amount Per Amount Per cent cent cent 6 7 8 9 10 11 -63 -0.1 8,494 10.6 6,409 7.3 -252 -1.0 2,126 9.7 2,069 8.6 191 0.3 5,283 9.9 3,773 6.4 222 8.0 481 19.2 189 6.3 -224 -8.1 554 28.1 252 10.0 0 50 200.0 125 166.7 150 6.8 560 31.2 599 25.4 0 0 0 0 0 0 157 7.5 542 31.9 587 26.2

1.

2.

3. 4. 5. 6. 7. 8.

9. 10. 11.

12. 13. 14. 15. 16. 17. 18.

1 Gross Traffic Receipts (a to e) (a) Passenger Earnings (b) Freight (Goods) Earnings (c) Sundry Other Earnings (d) Other Coaching (e) Suspense Total Miscellaneous Receipts (a to d) a) Interest on Fund Balances b) Receipts from Safety Surcharge on Passengers Fares c) Subsidy from General Revenues towards dividend relief & other concessions d) Other Miscellaneous Receipts Total Receipts (1+2) Net Ordinary Working Expenses Appropriation to Pension Fund Appropriation to Depreciation Reserve Fund Total Working Expenses {4+5+6} Total Miscellaneous Expenditure a) Appropriation to Special Railway Safety Fund b) O.L.W.R. (Open Line Works Revenue) c) Other Miscellaneous Expenditure Total Expenditure (7+8) Net Revenue (3-9) a) Dividend Payable to General Revenue b) Payment of Deferred Dividend c) Total Dividend Payment (a+b) Surplus [10-11(c)] Appropriation to Development Fund Appropriation to Capital Fund Appropriation to Railway Safety Fund Appropriation to Special Railway Safety Fund Operating Ratio Ratio of Net Revenue to Capital-atCharge and Investment from Capital Fund

-7 87 2,600 0 -825 1,775 -57 0 -3 -54 1,718 -1,631 60 0 60 -1,691 -1,049 -642 0 0 2 -1

-5.8 0.1 4.1 -15.5 2.2 -6.8 -5.0 -6.9 2.1 -20.1 1.1 1.1 -64.0 -52.5 -100.0 2.4 -19.7

18 9,054 11,151 2,950 -2,500 11,601 138 0 9 129 11,739 -2,685 821 0 821 -3,506 -440 -3,066 0 0 4 -4

18.8 11.1 20.5 28.1 -35.7 16.1 21.4 18.8 21.6 16.2 -29.3 17.4 17.4 -78.7 -31.6 -100.0 4.6 -39.8

12 7,008 -500 1,060 3,100 3,660 57 0 3 54 3,717 3,291 1,069 0 1,069 2,222 1,849 373 0 0 -2 2

10.5 7.7 -0.8 7.9 68.9 4.4 7.3 5.3 7.4 4.4 50.7 19.3 19.3 233.6 194.4 -2.5 30.2

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7. Analysis of Revised Estimates 2009-2010

The Revised Estimates (RE) for 2009-10 showed an increase of 0.3 per cent in the freight earnings but decline of 1.0 per cent in the passenger earnings from the budget estimates to Rs.58,716 crore and Rs.24,057 crore, respectively. Thus, the gross traffic receipts in 2009-10 (RE) at Rs.88,356 crore were marginally lower by 0.1 per cent compared to the Budget Estimates (BE). On the other hand, the total working expenses increased to Rs.83,440 crore, mainly due to higher ordinary working expenses by 4.1 per cent to Rs.65,500 crore. Consequently, the net revenue and the surplus of the Railways declined substantially to Rs.6,490 crore and Rs.951 crore in the Revised Estimates from Rs.8,121crore and Rs.2,642 crore in the BE. As a result, both the operating ratio and the net return on capital investment deteriorated to 94.7 per cent and 5.3 per cent, respectively, from 92.5 per cent and 6.6 per cent in BE.

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8. Analysis of Budget Estimates 2010-2011

8.1. Gross Traffic Receipts

The growth in gross traffic receipts for 2010-11, budgeted at Rs.94,756 crore, would moderate to 7.3 per cent from 10.6 per cent in 2009 -10 (RE), with all the components contributing to the moderation. Freight earnings at Rs.62,489 crore will grow by 6.4 per cent during 2010-11 lower than 9.9 per cent in the previous year. The passenger earnings at Rs.26,126 crore would increase by 8.6 per cent as compared with 9.7 per cent in the preceding year.

8.2. Working Expenses

Total working expenses for 2010-11 budgeted at Rs.87,100 crore are expected to increase at a much lower rate of 4.4 per cent than 16.1 per cent in 2009-10, primarily due to decline in ordinary net working expenses by 0.8 per cent. All components of net ordinary working expenses, except fuel, are expected to decline du ring 2010-11.

8.3. Net Financial Results

The net revenue (total receipt minus total expenditure) of the railways is budgeted to increase to Rs.9,781 crore during 2010-11 from Rs.6,490 crore in 2009- 10. Both the total dividend payment and net surplus i.e ., net revenue less total dividend payable, would increase to Rs.6,608 crore and Rs.3,173 crore, respectively. The operating ratio (total working
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expenses to total earnings ratio) is projected to improve, albeit marginally during 2010-11 on account of better expenditure

management reflected in significant moderation in the increase of working expenses. Similarly, the return on capital i.e., ratio of net revenue to Capital-at- Charge and Investment from Capital Fund, would improve to 6.9 per cent from 5.3 pe r cent.

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Operating ratio of Indian Railways:

Year 1 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (RE) 2010-11 (BE)

Operating Ratio 2 92.1 91.0 83.2 78.7 75.9 90.5 94.7 92.3

Operating ratio actually means how much railways is spending to earn a rupee. Hence, the lower the ratio, the better it is. The operating ratio of BE of 2010-2011 is 2.4 % less than than that of the operating ration of RE 2009-2010. This is a good news as it implies that the Railways are spending Rs.2.4 less to earn Rs.100 i.e. as per BE of 2010-2011, Railways spend Rs.92.3 to earn Rs.100 whereas in RE 2009-10, they had to spend Rs. 94.7 to earn Rs.100! But still as

compared to previous years say 2006 -07, 2007-08 and 2008-09, the operating ratio as of now is high. This may be due to the 6 th pay commission and the economic slowdown. During the pay commission, the Railways have to release excess payment to its employees and as a result, there is increase in the operating ratio!

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9. Annexure

Questionnaire

Q.1. When was the first Railway Budget produced?

Q.2. What are the contents of a Railway Budget?

Q.3. How long does it take to make a Railway Budget?

Q.4. How much time is consumed in planning and decision making?

Q.5. Can anyone oppose the Railway Budget?

Q.6. What are revised and estimated budget?

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10.

Conclusions and Recommendations

The financial performance of Indian Railways further became gradually worse in the revised estimates for 2009-10. The budget estimates for 2010-11, however, indicates reverse of this trend with both the operating ratio and the return on capital showing some improvement. The operating ration still is high as compared to previous years. It may be because of the economic slowdown and also the advent of 6th pay commission where the Railways had to give a whooping Rs 50,000 crores to its employees. It may be pointed out that the budgeted improvement in the financial indicators during 2010 -11 has been largely expenditure - led with moderation in working expenses. However, the realization of this budgeted improvement in the financial position of Railways would also depend upon the envisaged increase in the freight business and passenger earnings, which may not be difficult with sustained economic recovery. Ra ilways have initiated accounting reforms project that would enable it to shift gradually to an accrual based accounting system. Several measures have been proposed for enhancing safety and security, modernisation and development of infrastructure, improvement in the welfare of railway employees and increasing the carrying capacity of railways. The reduction in freight charge for food grain for domestic use and kerosene would help in keeping price level of these commodities under control and would satisfy the aam aadmi i.e. the common man. I would recommend that the government should heed to by the Railways request of reducing the procedural delays regarding investors so that these private players does not get disappointed and can help the
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Railways in developing at a faster rate. The day should not be far when we Indian can actually see cleaner and faster Railways. We citizens also have certain duties towards the Railways. Railways are our property and we should take care of it. Railway properties and premises become an easy target for us during riots and strikes. And we ourselves blame the Railways for lack of facilities. If we citizens go on a damaging spree, how can Railways provide better facilities? If we litter in the Railway premises, how can we get world class stations? So apart from the Railways and the government, even we citizens should take care of our duties. If all these three join hands, we can definitely take the Railways ahead and see our train running at top speeds and relish the presence of world class railway stations and facilities!

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11.

Bibliography

1. The Indian Railways Financial Code - IRFC (volume-1). 2. Railway authorities like Mr. Rajendra. P. Saxena, Chief Engineer (Planning), Western Railways and Mr. C.V.L Phani, Senior Sectional Engineer (Drawing), Western Railways. 3. Indian Railways website- indianrailways.gov.in 4. RBIs website- rbi.org.in 5. Indian Railways Fan Club association (IRFCA) website- irfca.org for variety of information on Indian Railways. 6. UNICONs Railway Budget Analysis. 7. Some individual projects from scribd.com on Indian Railways.

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Workhorses of Indian Railways

(a few of many)

WAP-4 electric locomotive

WDM-3A diesel locomotive

WCAG-1 electric locomotive

WDP -4 diesel locomotive

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