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

1

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 Parvathi 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.

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Index

S.

No.

Topic Page No.

1. INDIAN RAILWAYS 9

2. History of Railways in India 9

3. Railway Zones and their Head Quarters 13

4. Budget 18

5. Railway Budget 18

5.1 History of Railway Budgeting in India 19

5.2 The Actworth Committee 21

5.3 The consolidated fund of India 22

5.4 Demand for Grants 22

5.5 Budget planning 24

5.6 Compilation and scrutiny of budget in the

Railway Board

30

5.7 Submission to the Minister 31

5.8 Presentation to the Parliament 32

5.9 Appropriation Bill 32

5.10 Administering the Budget 32

5.11 Responsibility of Railway Administration

in case of Excess or Lapse

34

5.12 Powers of Railway Administrations in case

of emergent and inevitable expenditure

35

5.13 Powers of the Railway Board 36

5.14 Powers of the Railway Administration 36

5.15 Unforeseen Expenditure- operation from

the Contingency Fund of India

37

3

6 Gist of Railway Budget 2010-2011 30

7 Analysis of Revised Estimates 2009-2010 61

8 Analysis of Budget Estimates 2010-2011 62

9 Annexure 65

10 Conclusions and

Recommendations

66

11 Bibliography 68

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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 the 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 day’s or a week’s 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 figures 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

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aims for ‘Inclusive 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.

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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.

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3. To understand and appreciate the ‘Effective planning, decision making

and forecasting’ mechanism in Indian Railways.

Methodology

1. For primary data, direct interactions with certain Railway Authorities

were used.

2. Secondary data was obtained from referring books and websites.

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1. Indian Railways

Indian Railways (Hindi: भा�रती�य र�ल Bhāratīya Rail), abbreviated as IR

(Hindi: भा�.र�.), 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 thereafter 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

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London by (a) East Indian Railway (EIR) company which was headed

by R. McDonald Stephenson, and (b) Great Indian Peninsula Railway

(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 have

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 conception, 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

10

a passage of one and a half years, the first passenger train service was

introduced between Bori Bunder (Bombay) and Thana on the

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 company. 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 condition of

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railways became miserable. In 1920, the Government captured the

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 maximum 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 was

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 Kerala 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 new zones have

been created, giving a total of 16.

The nine older railway zones are:

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:

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 divisions to

67.

14

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

South Western Railway (SWR)

Hubli Bangalore and Mysore divisions of SR, reorganized Hubli division of SCR, including Hospet-Toranagal. (Earlier constituted to have Guntakal division of SCR as well.)

West Central Railway (WCR)

Jabalpur Jabalpur and Bhopal divisions of CR, reorganized Kota division of WR

North Central Railway (NCR)

Allahabad Reorganized divisions: Allahabad of NR, Jhansi of CR, and new Agra division

South East Central Railway (SECR)

Bilaspur Nagpur division and reorganized Bilaspur division of SER, new Raipur division

2. Old zones as they are after April 2003

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Zone Headquarters Divisions

Western Railway(WR) Mumbai Bhavnagar and Mumbai divisions, reorganized Ratlam, Rajkot and Vadodara divisions, new Ahmedabad division

Central Railway (CR) Mumbai Bhusawal and Nagpur divisions, reorganized Mumbai CST and Solapur divisions, new Pune division (including Pune-Kolhapur)

Eastern Railway (ER) Kolkatta Howrah, Malda, Sealdah, and Asansol divisions

Southern Railway (SR) Chennai Chennai, Palghat, Tiruchirapalli, Thiruvananthapuram, and Madurai divisions, Salem division has been carved out of Palghat and Madurai divisons.

Northern Railway (NR) Delhi Ferozpur, Ambala, Lucknow and Moradabad divisions, reorganized Delhi division

North Eastern Railway (NER)

Gorakhpur Lucknow and Varanasi divisions, reorganized Izzatnagar division

South Central Railway (SCR) Secunderabad Reorganized Secunderabad, Hyderabad, Guntakal (including Bellary-Guntakal (MG) and Bellary-Rayadurg), and Vijayawada divisions, new Guntur and Nanded divisions.

South Eastern Railway (SER) Kolkata Kharagpur division, reorganized Adra and Chakradharpur divisions, new Ranchi division

Northeast Frontier Railway (NFR)

Guwahati Katihar, Lumding, Tinsukia divisions, reorganized Alipurduar division, new Rangiya division

3. New zones that were created in 2002

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Zone Headquarters Divisions

North Western Railway (NWR)

Jaipur Jodhpur division and reorganized Bikaner division of NR, reorganized Jaipur and Ajmer divisions of WR

East Central Railway (ECR) Hajipur 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 day’s 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 organisation’s targets &

goals. ‘Indian Railways’ in one such organisation. Planning & decision

making is of utmost importance here also. Indian Railways is the largest

18

employer in the world and is spread across the length & breadth of the

country. So one can really imagine how planning & decision making is

essential as it involves sanctioning & handling huge amount of capital

for many projects. Railways don’t simply mean running trains on the

track, issuing tickets to passengers etc. Railways have various

departments managing various activities right from 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 of 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 these, 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 excecutive’s 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

20

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 20th 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 totally 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 railway

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

22

necessary that the entire parliamentary procedure of passing the budget

is completed before 31st March.

The following table explains various demands under ‘Demand for Grants’:

Number of demand

Particulars of the demand

1 Railway Board2 Miscellaneous expenditure3 General Superintendence and Services4 Repairs and Maintenance of Way and Works5 Repairs and Maintenance of Motive Power (Locomotives)6 Repairs and Maintenance of Carriage and Wagons7 Repairs and Maintenance of Plant and Equipment8 Operating Expenses- Rolling Stock and Equipment9 Operating Expenses- Traffic10 Operating Expenses- Fuel11 Staff Welfare and Amenities12 Miscellaneous Working Expenses13 Provident Fund, Pension and other Retirement Benefits14 Appropriation to Funds15 Dividend to General Revenues, Repayment of loan taken from General

Revenues and Amortization of over-capitalization16 Assets-Acquisition, Construction and replacement.

23

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 electrification 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 DATE

Prior approval of the board. 30th JuneCeiling advised. AprilPreliminary works program SeptemberWorks program- Advisor’s meeting November-DecemberFull board meeting December-JanuaryBudget Presentation 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 board’s estimation may

differ with the zonal railway’s estimate of the work and if the zonal

25

railway estimate is more than the board’s 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 year’s Budget.

26

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

27

furnished with the summary of the ordinary 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):

28

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

29

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

Government’s 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:

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.

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:

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

31

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 funds

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 year 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

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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 find 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 work 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 traffic

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

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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 permissible

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 administrations 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;

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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

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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 urges 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 join

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 don’t have to expect money every time from their

seniors and it can save good amount of time.

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

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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 everyone’s safety. To address this issue, the Railways will adopt

twin strategy- highest level of technology and pressing into force well-

trained manpower.

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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.

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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:

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.

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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

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.

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.

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.

A premium tatkal service for parcel and freight movement is under

consideration.

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.

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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 reforms 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:

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.

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.

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.

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.

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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 with Nepal.

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.

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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

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 produced many of his

literary jewels in undivided Bengal. In homage to this great savant and

to strengthen the maître 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 Nation’s destiny, Railways have named

these trains Matribhoomi specials.

37. Railways propose to introduce unreserved ‘Karmabhoomi’ trains for the

common man.

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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 rail

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

Railways, therefore, dedicate a new express train service, Janmabhoomi,

between Ahmedabad and Udhampur every week.

39. To support government’s 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 Kabiguru’s 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.

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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

reduction of Rs 100 per wagon in freight charges for 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

51

levied. The Railways propose to reduce the maximum limit of service

charge to Rs.10 for Sleeper Class and Rs.20 for AC Class.

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 citizens.

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 country!

46. Railways care for our 80,000 women employees. It is, therefore,

proposed to set up 50 crèches 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:

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

Fund allocation of INR 44.11bn for new lines.

Fund allocation of INR 13.02bn for passenger amenities.

Fund allocation of INR 10.01bn for Metro Projects.

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

National Projects.

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

wagon factories in JV/PPP mode.

Several projects being taken up on cost sharing basis with State

Governments and on PPP mode.

48. Financial Performance in 2009-10:

Loading target of 882 MT likely to surpass by 8 MT in 2009-10.

Gross Traffic Receipts kept at INR 883.56bn, (+10.7%).

Annual Plan outlay kept at INR 402.84bn.

49. Revised Estimates 2009-2010:

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

191 crore more than the budget estimates.

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

crore.

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Along with revised Other Coaching earnings of Rs 2,526 crore and

Sundry Other earnings of Rs 2,982 crore, the total gross earnings has

now been fixed at Rs 88,281 crore.

Gross Traffic Receipts have been reduced marginally from the Budget

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

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

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

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.

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.

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.

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

expenditure has been regulated in such a manner as to ensure 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.

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

the investment on National Projects.

50. Budget Estimates for 2010-2011:

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

increase of 54 MT over revised estimates 2009-10.

Freight throughput has been projected at 623 billion NTKM.

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.

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

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 Estimates

for 2009-10.

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.

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

9,782 crore.

55

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

92.3%. The Excess is proposed to be appropriated to Development Fund

(Rs2,800 crore) and Capital Fund (Rs 373 crore).

56

Comparison ofBudget Estimates and Revised Estimates of 2009-2010

Railway Budget

(All amounts in Rs. crores)

57

Comparison of Budget Estimates and Revised Estimates of 2009-2010 with

that of Budget Estimates of 2010-2011 Railway Budget

(All amounts in Rs. crores)

58

Financial Statements:

Statement 1: Financial Results of Railways(Rs. crore)

Items 2008-09 (Actuals

)

2009-10 (Budget

Estimates)

2009-10 (Revised

Estimates)

2010-11 (Budget

Estimates)1 2 3 4 5

1. Gross Traffic Receipts (a to e) 79,862 88,419 88,356 94,765  (a) Passenger Earnings 21,931 24,309 24,057 26,126  (b) Freight (Goods) Earnings 53,433 58,525 58,716 62,489  (c) Sundry Other Earnings 2,501 2,760 2,982 3,171  (d) Other Coaching 1,972 2,750 2,526 2,778

59

  (e) Suspense 25 75 75 2002. Total Miscellaneous Receipts (a to d) 1,797 2,207 2,357 2,956  a) Interest on Fund Balances 0 0 0 0  b) Receipts from Safety Surcharge on

Passengers Fares0 0 0 0

  c) Subsidy from General Revenues towards dividend relief & other concessions

1,701 2,086 2,243 2830

  d) Other Miscellaneous Receipts 96 121 114 1263. Total Receipts (1+2) 81,659 90,626 90,713 97,7214.  Net Ordinary Working Expenses 54,349 62,900 65,500 65,0005.  Appropriation to Pension Fund 10,490 13,440 13,440 14,5006.  Appropriation to Depreciation Reserve Fund 7,000 5,325 4,500 7,6007. Total Working Expenses {4+5+6} 71,839 81,665 83,440 87,1008. Total Miscellaneous Expenditure 645 840 783 840  a) Appropriation to Special Railway Safety Fund 0 0 0 0  b) O.L.W.R. (Open Line Works Revenue) 48 60 57 60  c) Other Miscellaneous Expenditure 597 780 726 7809. Total Expenditure (7+ 8) 72,484 82,505 84,223 87,94010.

Net Revenue (3- 9) 9,175 8,121 6,490 9,781

11.

a) Dividend Payable to General Revenue 4,718 5,479 5,539 6,608

  b) Payment of Deferred Dividend 0 0 0 0  c) Total Dividend Payment (a+b) 4,718 5,479 5,539 6,60812.

Surplus [10-11(c)] 4,457 2,642 951 3,173

13.

Appropriation to Development Fund 1,391 2,000 951 2,800

14.

Appropriation to Capital Fund 3,066 642 0 373

15.

Appropriation to Railway Safety Fund 0 0 0 0

16.

Appropriation to Special Railway Safety Fund 0 0 0 0

17.

Operating Ratio 90.5 92.5 94.7 92.3

18.

Ratio of Net Revenue to Capital-at-Charge and Investment from Capital Fund

8.8 6.6 5.3 6.9

Source : Explanatory Memorandum on the Railway Budget, 2010-11.

60

61

Statement 1: Financial Results of Railways (Concld.)(Rs. crore)

Items VariationsCol.4 over Col. 3 Col.4 over Col. 2 Col.5 over Col. 4

Amount Per cent

Amount Per cent

Amount Per cent

1 6 7 8 9 10 111. Gross Traffic Receipts (a to e) -63 -0.1 8,494 10.6 6,409 7.3  (a) Passenger Earnings -252 -1.0 2,126 9.7 2,069 8.6  (b) Freight (Goods) Earnings 191 0.3 5,283 9.9 3,773 6.4  (c) Sundry Other Earnings 222 8.0 481 19.2 189 6.3  (d) Other Coaching -224 -8.1 554 28.1 252 10.0  (e) Suspense 0 — 50 200.0 125 166.72. Total Miscellaneous Receipts (a to d) 150 6.8 560 31.2 599 25.4  a) Interest on Fund Balances 0 — 0 — 0 —  b) Receipts from Safety Surcharge on

Passengers Fares0 — 0 — 0 —

  c) Subsidy from General Revenues towards dividend relief & other concessions

157 7.5 542 31.9 587 26.2

  d) Other Miscellaneous Receipts -7 -5.8 18 18.8 12 10.53. Total Receipts (1+2) 87 0.1 9,054 11.1 7,008 7.74. Net Ordinary Working Expenses 2,600 4.1 11,151 20.5 -500 -0.85. Appropriation to Pension Fund 0 — 2,950 28.1 1,060 7.96. Appropriation to Depreciation

Reserve Fund-825 -15.5 -2,500 -35.7 3,100 68.9

7. Total Working Expenses {4+5+6} 1,775 2.2 11,601 16.1 3,660 4.48. Total Miscellaneous Expenditure -57 -6.8 138 21.4 57 7.3  a) Appropriation to Special Railway

Safety Fund0 — 0 — 0 —

  b) O.L.W.R. (Open Line Works Revenue)

-3 -5.0 9 18.8 3 5.3

  c) Other Miscellaneous Expenditure -54 -6.9 129 21.6 54 7.49. Total Expenditure (7+8) 1,718 2.1 11,739 16.2 3,717 4.410. Net Revenue (3-9) -1,631 -20.1 -2,685 -29.3 3,291 50.711. a) Dividend Payable to General

Revenue60 1.1 821 17.4 1,069 19.3

  b) Payment of Deferred Dividend 0 — 0 — 0 —  c) Total Dividend Payment (a+b) 60 1.1 821 17.4 1,069 19.312. Surplus [10-11(c)] -1,691 -64.0 -3,506 -78.7 2,222 233.613. Appropriation to Development Fund -1,049 -52.5 -440 -31.6 1,849 194.414. Appropriation to Capital Fund -642 -100.0 -3,066 -100.0 373 —15. Appropriation to Railway Safety

Fund0 — 0 — 0 —

16. Appropriation to Special Railway Safety Fund

0 — 0 — 0 —

17. Operating Ratio 2 2.4 4 4.6 -2 -2.518. Ratio of Net Revenue to Capital-at-

Charge and Investment from Capital Fund

-1 -19.7 -4 -39.8 2 30.2

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.

62

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 during 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 per cent.

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Operating ratio of Indian Railways:

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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Year Operating Ratio

1 22003-04 92.12004-05 91.02005-06 83.22006-07 78.72007-08 75.92008-09 90.52009-10 (RE)

94.7

2010-11 (BE)

92.3

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?

66

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 6 th 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. Railways 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

67

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. RBI’s website- rbi.org.in

5. Indian Railways Fan Club association (IRFCA) website- irfca.org for

variety of information on Indian Railways.

6. UNICON’s 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

70