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INTRODUCTION

Railways continue to be t h e principal mode of transport in India. Much

more than that, it has become a part and parcel of the country’s socio-economic life,

impacting not only its culture and socio-economic activities but also largely

influencing our art, history and literature besides unifying the people.

Way back in 1853, wheels rolled on rails on 16th April, where the first

ever railway t r a i n , carrying 400 people in 14 carriages, covered the 2 1 - m i l e

distance between Bombay and Thane in about 75 minutes. The train took off with a

regal 21-gun salute to celebrate the occasion. It started as a system to serve the

colonial interests of the foreign master has developed into the main vehicle for

socio-economic development of a welfare society.

The Indian railways are a government concern as most of the capital

invested on railways has been provided by the government, either by loans raised

by it or from its own surpluses. They are a commercial concern in as much as they

are engaged in manufacturing and in sale of “transport”, thus making profits and

maintaining their own assets and paying dividend to the general revenues on the

capital invested on the railway undertaking.

It has become a part and parcel of the country’s socio-economic life, impacting

not only its culture and socio-economic activities but also largely influencing our

art, history and literature besides unifying the people.

. It started as a system to serve the colonial interests of the foreign master

has developed into the main vehicle for socio-economic development of a welfare

society.

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BUDGET

A statement of estimated annual receipt and expenditure whether, on capital or

revenue account of central government is prepared by the railway board. In other words it can

be said that under (article 112) of constitution of India, the president will call upon a

statement from Railways showing the estimated income and the out-lay amount that has to

cross the Consolidated Fund of India. These statements are known as 'Budget'.

A budget is a detailed plan of operations of some specific future period. It is an

estimate prepared in advance of the period to which it' applies. It acts as a business

barometer as it is a complete programmer of activities of the business for the period

covered.

According to Gordon and Shilling law budget may be defined as "a predetermined

detailed plan of action developed and distributed as-a guide to current operations and as a

partial basis for subsequent evaluation of performance."

The Chartered Institute of Management Accountants, London, defines a budget as "a

financial and/ or quantitative statement, prepared prior for a defined period of time, of the

policy to pursued during that period for the purpose of attaining a given objective."

NATURE OF BUDGETARY CONTROL

Budgetary control is the process of determining various budgeted figures for the

enterprise for the future period and then comparing the budgeted figures with the actual

performance for calculating variances, if any. First of all budgets are prepared and then

actual results are recorded. The comparison of budgeted and actual figures will enable the

management to find out description and take remedial measures at a proper time. The

budgetary control is a continuous process, which helps in planning and co ordination. It

provides a method of control too.

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According to J.A. Scott, "it is the system of management control and accounting in

which all operations are forecasted and so far as possible planned ahead, and the actual

results compared with forecasted and planned ones."

BUDGET, BUDGETING AND BUDGETARY CONTROL

A budget is a blue print of a plan expressed in quantitative--terms. Budgeting is a

technique for formulating budgets. Budgetary control, on the other hand, refers to the

principles, procedures and practices of achieving given objectives through budgets.

According to Rowland and William have differentiated the three terms as;

"Budget are the individual objectives of a department, etc., where as Budgeting may be

said to be the act of building budgets.' Budgetary control embraces all and in addition

includes the science of planning the budgets to affect an overall management tool for the

business planning and control."

DIFFERENCE BETWEEN BUDGET & BUDGETTARY CONTROL

1. The budget is an act of planning whereas budgetary control is an act of controlling.

2. The budget concerns itself with the future. Budgetary control is

however concerned with the present activities although it is prepared on the basis of

data collected from the past budget. But the activities that the budgetary control

involves are not limited to that budget only. It is also related to the questions as to

how far the budget can effectively utilized in future.

3. The budget fixes the target and budgetary control helps to arrive at that target.

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NEED OF THE STUDY

The budget control system helps in fixing the goals for the organization as

whole as concerned efforts are made for its achievements. It enables economics in

the enterprises. Budgetary control aims at the maximization of profit of the

enterprises. The working of different departments and sections is properly co-

ordinate. By providing targets to various departments budgetary control provides a tool

for measuring managerial performance

PERIOD OF THE STUDY

The period of the study was five years i.e. from 2004-2009. The resarcher

has analysed the financial year stetments of South central railways

SCOPE OF THE STUDY

Any work without boundaries result in ambiguous end. So this study has been

confined to the Finance Department of South Central Railway, Vijayawada Division.

South Central Railway is one of the Zones of Indian Railways and Vijayawada

Division is one among the six Divisions of South Central Railway. The

information about financing strategies and policies are difficult to collect as the head

office of South Central Railway as well as Railway Board mainly frames them. The

study mainly concentrates on the budgetary aspects of Vijayawada Division.

OBJECTIVES OF THE STUDY

 The main objective is to study the effectiveness of Revenue Budget in South

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Central Railway at Vijayawada Division.

 To study the data relating to the actual preparation of Budget and find

the deviations.

 To study those areas of budget that are having big deviations between

proposed and actual spending and to come out with effective solution that

helps in reducing the gap between proposed and actual.

 To Whom It May Concern: study the reasons for deviations by collecting the

views from employees and others those who are related to budget operations.

 To study the present financial position of the Division by making comparative

analysis.

 To give suggestions for the betterment of the organization

RESEARCH METHODOLOGYS

Research is an academic activity and as such the term should be used in a

technical sense. According to Chifford woody Research comprises defining and re-

defining problems, formulating Hypothesis or suggested solutions; organizing and

evaluation data, making deduction and reaching conclusion and. At last carefully

testing the conclusions to determine whether they fit the formulating the hypothesis.

Information and data presented in the report is collected from two sources.

They are

1. Primary Sources

2. Secondary Sources

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Primary Source

The primary data required for the study has been collected by personal

interaction with employee offices and other concerned persons of Finance Division.

Secondary Source

The secondary data has been collected from

1. Annual reports

2. Web sites

3. Company journals

LIMITATIONS OF THE STUDY

The hindrances that came across during the period of my study and which show

their effect on my study are mentioned below as the limitations of the study. Those

are as follows:

1. As railways consist of different zones the budget of one zone is linked with

the budget of another zone, but i have consider only VJA division.

2. Due to the unavailability of current periods data i.e., 2009-10 the present

year performance could not be analyzed.

3. A study on Revenue Budget does not reflect the whole financial position of

the Division.

4. The time available to conduct the study was only 2 months. It being a wide topic

had a limited time.

5. The time available to conduct the study was only 2 months. It being a wide topic

had a limited time

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INDUSTRY PROFILE

Indian Railways abbreviated as IR, is a Department of Government of India,

under Ministry of Railways and is tasked with operating the rail network in

India. The Ministry is headed by a cabinet rank Railways Minister, whereas, the

department is managed by Railway Board. Indian Railways is NOT a corporate

body, as many people think. However, of late, IR is trying to adopt a corporate

management style.

Indian Railways had, until recently, a monopoly on the country's rail transport.

It is one of the largest and busiest rail networks in the -world, transporting fourteen

million passengers and more than one million tonnes of freight daily. IR is the

world's largest commercial or utility, employer, with more than 1.6 million

employees, and is second only in total terms to the Chinese Army.

The railways traverse through the length and width .of the country; the routes

cover a total length of 63,140 km (39,233 miles). As of 2002, IR owned a total

of 216,717 wagons, 39,263 coaches and 7,739 locomotives and ran a total of

14,444 trains daily, including about 8,702 passenger trains.

Railways were first introduced to India in 1853. By 1947, the year of India’s

Independence, there were forty-two rail systems. In 1951 the systems were

nationalized as one unit, becoming one of the largest networks in the world. Indian

Railways operates both long distance and sub-urban rail systems

Extent of Great Indian Peninsular Railway network in 1870. The GIPR was

one of the largest r a i l companies at that tim

A plan for a rail system in India was first put forward in 1832, but nofurther

stepswere taken for more than a decade. In 1844, the Governor General of India

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Lord Hardinge allowed private entrepreneurs to set up a rail system in India. Two

new railway companies were created and the East India Company was asked to

assist them. Interest from investors in the UK l e d to the rapid creation of a rail

system over the next few years. The first train in India became operational on

TS51-12-22, and was used for the hauling of construction.

Material in Roorkee. A year and a half later, on 1853-04-8 6, the first

passenger train service was inaugurated between Bori Bunder, Bombay and Thana.

Covering a distance of 34 km (21 miles), it was hauled by three locomotives, Sahib,

Sindh and Sultan. This was the formal birth of railways in India.

The British government encouraged new railway companies backed by

private investors under a scheme that would guarantee an annual return of l i v e

percent during the initial years of operation. Once established, the company would be

transferred to the government, with the original company retaining operational control.

The route mileage of this network was about 14,500 km (9,000 miles) by 1880,

mostly radiating inward from the three major port cities of Bombay, Madras and

Calcutta. By 1 8 9 5 , India had started building its own locomotives, and in 1896

sent engineers and locomotives to help build the Uganda Railway.

Soon various independent kingdoms built their own rail systems and the

network spread to the regions that became the modern-day states of Assam,

Rajasthan and Andhra Pradesh. A Railway Board was constituted in 1901, but

decision-making power was retained by the Viceroy, Lord Curzon. The Railway

Board operated under aegis of the Department of Commerce and Industry and had

three members: a government railway official serving as chairman, a railway

manager from England and an agent of one of the company railways. For the first

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time in its history, the Railways began to make a tidy profit. In 1907, almost all the

rail companies were taken over by the government.

The following year, the first electric locomotive appeared. With the arrival of

the First World War, the railways were used to meet the needs of the British

outside India. By the end of the First World War, the railways had suffered

immensely and were in a poor state. The government took over the management of

the Railways and removed the link between the financing of the Railways and

other governmental revenues in 1920, a practice that continues to date with a

separate railway budget.

The Second World War severely crippled the railways as "trains were diverted

to the Middle East, and the railway workshops were converted into munitions

workshops. At the time of independence in 1947, a large portion of the railways

went to the then newly formed Pakistan. A trial of forty-two separate railway systems,

including thirty-two lines owned by the former Indian princely states, were

amalgamated as a single unit which was christened as the Indian Railways.

The existing rail networks were abandoned in favor of zones in 1951 and a

total of six zones came into being in 1952. As the economy, of India improved, almost

a l l railway production units were indigenized. By 1985, steam locomotives were

phased out in favor of diesel and electric locomotives. The entire railway

reservation system was streamlined with computerization in 1995.

Indian Railways, the premier transport organization of the country is the

largest rail network in Asia and the world's second largest tinder one management.

Indian Railways is a multi-gauge, multi-traction system covering the following.

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Broad Gauge (1676mm) 83073 km

Meter Gauge (1000mm) 20343 km

Narrow Gauge (61 0 and 762mm) 4027 km

Since then the railways have spread over different corners of India and at the

beginning, the task of railways was entrusted the individual companies. Now all the

major railways are owned and managed by the Govt. of India. Even today there are

some railways, which are managed by some private companies.

"Railway" means a railway or any portion of a railway 'for the public

carriage or passengers or goods and includes.

 All land within the fences or other boundary indicating the limits of the land

appurtenant to a railways.

 A l l l i n e s of railway, siding or branches worked over for the purpose of or in

connection with a railway.

 All stations, offices, warehouses, workshops, manufactories, fixed plant

and other works constructed for the purpose of, or in connection with railway.

The Indian Railways are one of the largest systems in the world.

It provides the principle mode of transport for fright and passenger's. It has

played a vital role in the Economic, Industrial and social development of our country.

There is no better way to witness India, than to view the changing scenes from a

carriage window of a train. Through British .laid most of the 38525 miles (62000

KMS) of track, if was assumed the end of colonial rule in India, marks the beginning

of travel as you please.

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OBJECTIVES OF THE STUDY

The corporate management objectives of railway undertaking are as under.

To provide transport for both passengers and goods adequate to meet demand

in areas where railway operation confers optimum benefit to the economy having

due regard to the government's policy of development of back ward areas.

 To provide such rail transport at the lowest cost consistent with

 Requirements of the railway users and safety of operation

 Adequate provision for replacement of assets and son e provisions for

development of business, and

 The least amount of pollution of environment.

 To work in association with or utilize other needs of transportation, such as

pipe lines and road transport, and to engage in railway

activitiesnecessary to sub serve the above two objectives; and

 To establish corporate image of the railways as being an up-to-date business

organization with the interest of .public and of the nation as i t s prime

objectives; and

 To develop organizationally effective personnel with pride in their work and

faith in the management.

INNOVATIVE TECHNOLOGIES BY KONKAN RAILWAYS

Konkan Railway Corporation (KRC), the technological marvel of Indian

Railways, has invented quite a few new technologies" Anti Collision device (ACD),

state-of-art indigenous technology of KRC is currently under-going intensive field

trails and is capable of avoiding collision between trains. Sky bus metro is another

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innovative, economic and eco-friendly mass rapid transportation solution devised

by KRC, which is undergoing trials at present, will help railways run the fastest

train in the near future and will make tracks much more safe and sustainable.

NEW TECHNOLOGIES

India became the first developing country and the 5 th country in the world to

roll out the first indigenously built "state-of-the-art" high horse power three-phase

electric locomotive. When the first such loco was Hugged off from Chittranjan

Locomotive Works (CLW) CLW has been achieving progressive indigenization and

the cost of 'locomotives has come down to the level of Rs.13.65 cr. diesel

locomotives works, Varanasi has produced state-of-the-art 4000HR AC/AC diesel

locomotive in April 2003. These 'locos are capable of handling 4800 tone freight

trains at a speed of 100 KMPII. and can continuously up to 90 days in one

stretch without any major maintenance. Darjeeling Himalayan Railways attained

the world heritage status from UNESCO. Fairy Queen, the oldest functioning steam

engine in the world, which finds place in the Guinness Book of world records, got

heritage award at the International Tourist Bureau, Berlin in March 2000. On

operational front, Delhi Main Station entered the Guinness Book for haying the

world's largest route relay interlocking system.

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ANNUAL PLAN 2008-09

The Annual plan of 2008-09 is the highest ever annual plan of the

railways. It is proposed to invest Rs.37, 500 cr. Which is 21 percent more than

the previous year? The total budgetary support to be received from general

exchequer is Rs.7874 cr. including Rs.774 cr. to be provided from central road

fund? In this manner internal and external budgetary resources would constitute 79

per cent of the annual -plan. The outlay for doubling works has been increased to

Rs.2, 500 cr. traffic facility works-to Rs.1535 cr. has been proposed for

projects under implementation by RVNL. Provision for Rs.1730 cr. for new

lines, Rs.2489 cr. for gauge conversion, Rs.626 cr. for electrification & Rs.650

cr. for metropolitan transport projects has been made. On safety related plan

heads, provision has been made for Rs.3600 cr. for track renewals. Rs.1,520 cr.

for signal and telecommunication works, Rs.700 cr. for Road under, Bridges

and Rs.600 cr. for manning of unmanned level crossings. Additional funds to the

tune of Rs.1712 cr. have been sought for Ministry of Finance for national projects of

Udaipur-Srinagar Baramulla, Jiribam-Imphal Road, Dimapur-Kohinia, Azra-Bymiliat

and KUmarghat-Agartala new line, Bogibeel Rail-cum-Road Bridge and LUmding-Silchac-

Jiribam, Rangia-Murkongeiek gauge conversion.

ONGOING PROJECTS

During the current year, 2003 km broad gauge lines are likely to be

completed. The target for construction of broad gauge lines in "2008-09 is

3500 km. The construction of new lines between Kakaporc and Bedlam in

Kashmir Valley has already been completed and the remaining portion in the valley will be

completed in 2008-09

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NEW LINES

155 km of new line is likely to be completed in 2007-08. Bangalore-Hassan has

already been completed, Manu-Ambassa of Kumarghat-Agartala, Mahab-Khajuraho,

Bikramganj-Piro of Ara-Sasaram and Deogarh-Ghormara of Deogarh-Dumka are likely to

be completed soon.

A target of 350 km has been fixed for construction of new lines in 2008-09. Some

prominent sections are as follows:

 Ghormara-Kumka of Deogarh-Dumka

 Nagapattinam-Velenkanni

 Yerraguntla-Nossam of Yerraguntla-Nandyal

 Harapanhalli-Harihar

DOUBLING

During 2007-08, doubling of 500 km is expected to be completed while target of

1000 km has been fixed for the year 2008-09.

NEW PROJECTS

I am happy to inform the House that work of gauge conversation of Ratlam-

Indore-Khandwa-Akola, Udaipur-Ahhedabad, Suratpura-Hanumangarh-Sriganganagar, Jaipur-

Ringus-Churu & Sikar-Loharu, Madurai-Bodinayakkanur and new lines Kursela-Bihariganj,

Erode-Palani, Gaya-daltonganj, Chennai-puducheery-cuddalore,muzaffarpur-dardhanga,

Attipattu-puttur and jalalgarh-kishanganj have been included in the budget. The works of

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panskura-kharagpur, bina-bhopal, Champa-Jharsuguda, Rajkharswan-sini third line, the

state government of Maharashtra has agreed to share cost of manmad-indore and the

proposals would be processed further for necessary approval.

SURVEYS

Based on demands, the foiling surveys are proposed to be taken up:

 Washim-Badnera Khandwa-Dhar

 Solapur-Jalgon Rotegaon-Puntambu

 Rewari-Palwal-Khurja Baddi-Barotiwala-Nangal

 Meerut-Panipat Kanjangad-Panathur

 Salna-kumtai Dongargarh-Kota

 Ellenabad-Sirsa Junagarh-Arnbaguda

GAUGE CONVERSION

 Billimora-Waghai with extension up to manmad

 Pratapnagar -Jambusar-Kavi

 Jhaghadia-Netrang-with extension up to Nandurbai

 Mavi -Badi Sadri

 New mal-Maynaguri Road

DOULDING

 Aunrihar –Varanasi

 Lohto –Jhangai

 Buxar-Ara-Mokama third line

 Dornakal-Manuguru

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 Omalur -Mcttur Dam

 BUDGET ESTIMATES 2008-2009

The target for freight loading for the year 2008-09 has been kept, at 850 MT

and for freight output at 550 billion ton km. Budget Estimates for Freight, passenger,

sundry other earnings and other coaching earning have been kept at Rs.52,700 cr.

Rs.21,681 cr,Rs.5,000cr and Rs.2,420 cr. respectively.

Maintaining an overall double digit growth, gross traffic earnings have been

projected as Rs.81,801’cr, reflecting an increase of Rs.9,146-cr. on the current year

The provision for ordinary working expenses for 2008-09 has been kept at

Rs.50,000cr, which is 20 per cent more than the revised estimates for 2007-08.

Provision for depreciation reserve fund has been stepped up to Ks.7,000 cr. and

pension fund to Rs.9,590 cr. I have made an ad hoc provision of nearly Rs.5000

cr. for anticipated recommendations of the 6" pay commission. Thus the total

working expenses will be Rs.66,590 cr. and net revenue Rs.16,423 cr. while

railways cash surplus before dividend is projected at Rs.24,783 cr. the target

operating ratio is 81.4 percent. Dividend payable for 2007-08, is estimated at

Rs.4,636 cr. In the plan outlay for the next year, Rs.20,600 cr. will be

provided from internal sources.

PASSENGERS SERVICES

During the last four years railways had been reduced the fares of second class

by one rupee per passenger for suburban services, two rupees. per passenger for second

class non-suburban services, 20%, reduction in super-fast surcharge levied on second class

super fast mail/express trains, up to 24% in the fares for the AC 1st class and up to 14% in the

fares for AC 2-tier. We have done the magic of generating a surplus of 25,000 cr. despite

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reduction in fares. Bowing to the hopes of millions of people.

FREIGHT BUSINESS

In the earlier rating regime, freight rates for high value goods were higher than low

value of goods. Now, freight rates are not based on the value of goods but are fixed after

taking into account railways competitiveness and elasticity of demand. Under the new

pricing strategy, surcharge is-levied during peak season and discounts offered during lean

season. As per present policy, peak and non-peak season and discounts offered during lean

seasons have been fixed uniformly for all the commodities. While many

commodities have different peak and non-peak seasons, loading of some commodities

remains the same throughout the year. Therefore in 2008-09, we have decided to modify

this policy as per the prevailing market conditions.

During the last four years, we have rationalized the freight structure' extensively to

make it simple and transparent. Earlier, we had announced that barring some light

commodities, the difference in the highest rates and reduced the freight rates for petrol

and diesel by more than 12% during the last two years by reducing its classification from

class-240 to class-210. Thus, the rationalization of freight tariff has now completed and

barring few light commodities, the difference between the highest and the lowest rates is

not more than two times.

NEW STEPS TOWARDS SAFETY AND SECURITY

Safety of 13 million passengers that Indian Railway serves every day is of

paramount importance to the system. Over the years, apart from the regular safety

norms followed, the network has taken a number of steps' through innovative use of

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technology and stepped up training to its manpower to enhance safety standards. A

number of distressed bridges, old tracks, signaling system and other safety

enhancement devices will be replaced during this period. As far as budget

allocation for safety is concerned, Rsl400 cr. was allocated in the revised estimate

for the year. 2001-02, and Rs2210 cr. for the year 2002-03. Extensive field trials of the

Anti-collision Devise (ACD) indigenously developed by Konan Railway Is-going on and

once developed across the zonal railways, this innovative technology will help

railways reduce accidents due to collision between trains.

Security of railway passengers is at present a shared responsibility of the

Railway Protection Force (RPF) and Govt. Reserve Police (GRP). Efforts are on to

amend the Railway act to give more powers to the RPF in ensuring security of passengers

on trains and within railway premises.

WORKING OF RAILWAYS

The existing enactment regulating the construction and operation of

railways in India are the Indian train's ways of 1886 and the Indian railways act of

l99O as amended from time to time. According to the provisions of these

enactments, the executive authority in connection with the administration of

railways vests- i n the central government..

ADMINISTRATION

The ministry of Railways is responsible for management and running of

Railways. All the functions and powers of the central government under certain

sections of the Indian railways act are however delegated to the railway board

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under section 2- of the Indian Railway Board Act of 1905.

The Railway Board is to function as a corporate body and as a corporate is

responsible to advice the minister on all major questions of Railway policy. The

Railway board is the supreme authority for. day-to-day, administration of the

railways and consists of a chairman, a financial commissioner and four members—

member of staff, member of engineering, and member of mechanical and member of

transportation. The secretary, ministry of transportation also a member of the

board exofficio. The chairman of the railway board has the status of a principal

secretary to the Govt. of India. For the administrative purpose, Indian govt. railways

arc geographically divided into nine zones, each under a general manager who

exercises supervisory control over all the departments and also co-ordinates their

working.

IMPROVING FINANCIAL HEALTH

The financial position of Indian Railways has been slowly but steadily

improving some of the highlights of the financial performance during'2001-02

include: improved operating ratio from 98.8% to 96.6%, savings in ordinary

wording expenses of Rsl487 cr. Depreciable Reserve Fund (DRF) balance goes up

from Rs78.04 cr. during March last year to Rs632.99 cr. during same time this year.

Railways have established a new milestone in incremental freight loading during

duly this year by carrying 5.70 million tones of goods. Freight loading for the last

financial year crossed the target and attained 492.31 million tones.

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TIE-UP WITH FOREIGN RAILWAYS

Indian railways is in constant touch with Railways across the world to bring in

state-of-art facilities in its system towards this, a memorandum of understanding was

signed during the Eight Session of the Indo-Austria joint economic commission held

in Vienna. This seeks to promote and deepen long-term infrastructure-specific

cooperation between Indian and. Austrian railways to their mutual benefit. Indian

Railways in New Delhi in which hundreds of delegates from various industries

and Railways around the world participated organized a three-day International

conference of Union of Railways.

SOCIAL OBLIGATIONS AND CARE FOR WEAKER SECTIONS

Senior citizens, Students, Disabled persons etc., enjoy concessional

benefits from Railways. New initiatives in this Area during the last three years

include reduction of age limits for special concession to senior women citizen

from 65 to 60 years, blind and mentally challenged persons can now travel in

AC classes on concessional rates. A free second-class monthly season ticket

(MST’s) for school going children up to tenth standard for travel between

homes to school was also introduced.

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MAP

A schematic map of the Indian Railway network.

For administrative purposes, Indian Railways is divided into sixteen

zones.

TABLE

ZONES FOR INDIAN RAILWAYS

No. Name Abbr. Head Quarters Date Established


1. Northern Railway NR Delhi April 14; 1952
2. North Eastern Railway NER Gorakapur 1952
3. Northeast Frontier Railway NFR Milligan 1958

(Guwahati)
4. Eastern Railway ER Kolkata April, 1952
5. South Eastern Railway SER Kolkata 1955
6. South Central Railway SCR Secunderabad October 2, 1966
7. Southern Railway SR Chennai April 14, 1951
8. Central Railway CR Mumbai November 5, 1951
9. Western Railway WR Mumbai November 5, 1951
10. South Western Railway SWR Hubli April 1, 2003
11. North Western Railway NWR Jaipur October 1, 2002
12. West Central Railway WCR Jabalpur April 1, 2003
13. North Central Railway NCR Allahabad April 1, 2003
14. South East Central Railway SECR Bilaspur, CG April 1, 2003
15. East Coast Railway ECOR Bhavaneshwar April 1, 2003
16. East Central Railway ECR Hajipur October 1, 2002
17. Konkan Railway KR Navi Mumbai January 26, 1998

Konkan Railway (KR) is constituted as a separately incorporated railway, with its

headquarters at Belapur CBD (Navi Mumbai). It comes under the control of the Railway

Ministry and the Railway Board.

The Calcutta metro is owned and operated by Indian Railways, but is not a part of

any of the zones. It is administratively considered to have the status of a zonal railway.

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Each zonal railway is made up of a certain number of divisions, each having a divisional

head quarters. There are a total of sixty seven divisions.

TABLE

DIVISIONS OF INDIAN RAILWAYS

ZONAL RAILWAY DIVISIONS


Northern Railway Delhi, Ambala, Firozpur, Luck now, Moradabad
North Eastern Railway Izzatnagar, Luck now, Varanasi
Northeast Frontier Railway Alipurduar, Katihar, Lumding, Rangia, Tinsukia
Eastern Railway Howrah, Sealdah, Asansol, Malda
South Eastern Railway Agra, Chakradharpur, Kharagpur, Ranchi
South Central Railway Secunderabad, Hyderabad, Guntakal, Guntur, Nanded,

Vijayawada.
Southern Railway Chennai, Madhurai, Palghat, Tiruchchirapalli,

Trivandru, Salem
Central Railway Mumbai, Bhusawal, Pune, Solapur, Nagpur
Western Railway Mumbai Central, Baroda, Ratlam, Ahmedabad, Rajkot,

Bhavnagar
South Western Railway Hubli, Bangalore, Mysore
North Western Railway Jaipur, Ajmer, Bikaner, Jodhpur
West Central Railway Jabalpur, Bhopal, Kota
North Central Railway Allahabad, Agra, Jhansi
South East Central Railway Bilaspur, Raipur, Nagpur
East Coast Railway Khurda Road, Sambalpur, Visakhapatnam
East Central Railway Danapur, Dhanbad, Mughalsarai, Samastipur, Sonpur

Indian Railways operates 8,702 passenger trains and transports around five billion

annually across twenty six states and three union territories (Delhi, Puducherry (Formerly

Pondicherry) and Chandigarh). Sikkim and Meghalaya are only states not connected.

22
The passenger division is the most preferred from of long distance transport in

most of the country.

A standard passenger train consists of eighteen coaches, but some popular trains

can have up to 24 coaches. Coaches are designed to accommodate anywhere from 18 to 72

passengers, but may actually accommodate many more during the holiday seasons and on

busy routes. The coaches in use are vestibules, but some of these may be dummied on

some trains for operational reasons. Freight trains use a large variety of wagons.

Each coach has different accommodation class; the most popular being the

sleeper class, 'Up to nine of these type coaches are usually coupled. Air conditioned coaches

are also attached, and a standard train may have between three and five air-conditioned

coaches. Online passenger ticketing, introduced in 2004, is expected to top 100,000 per

day by 2009, while ATMs in many stations will be equipped to dispense long-distance

tickets by the end of 2007.

PRODUCTION SERVICES

The Indian Railways manufactures a lot of its Tolling stock and heavy engineering

components. This is largely due lo historical reasons. As with most developing

economies, the main reason is import substitution of expensive technology related

products. This was relevant when the general state of the national engineering industry was

immature.

Production Units, the manufacturing plants of the Indian Railways, are managed directly by

the ministry. The General Managers of the PUs report to the Railway Board. The

Production Units are:

• Diesel Locomotive Works, Varanasi

23
• Chittaranjan Locomotive Works, Chittaranjan

• Diesel-Loco Modernizations Works, patiala

• Integral Coach Factory, Chennai

• Rail Coach Factory, Kapurthala

• Wheel & Axle Plant, Bangalore

SUB-URBAN RAIL

Many cities have their own dedicated suburban networks to cater to commuters.

Currently, suburban networks operate in Mumbai (Bombay), Chennai (Madras), Kolkata

(Calcutta), Delhi, Hyderabad and Pune, Hyderabad, and Pune do not have dedicated

suburban tracks but share the tracks with king distance trains. New Delhi, Chennai and

Kolkata have their own metro networks, namely the New Delhi Metro, the Chennai

MRTS-Mass Rapid Transport System, same as other local EMU suburban service as in

Mumbai and Kolkata etc., but with dedicated tracks mostly laid on a flyover and the

Kolkata Metro, respectively

Suburban trains that handle commuter traffic are mostly electric multiple units.

They usually have nine coaches or sometimes twelve to handle rush hour traffic (Chennai

MRTS has three or six coach formation,-Hyderabad MMTS; abbreviation for Multi

Modal Transport System has mostly six coach train with a single nine coach one). One

unit of an EMU train consists of one power car and two general coaches. Thus a nine

coach EMU is made up of three units having one power car at each end and one at the

middle. The rakes in Mumbai run on direct current, while those elsewhere use

alternating current. A standard coach-is designed to accommodate 96 seated passengers, but

24
the actual number of passengers can easily double or triple with standees during rush

hour. The Kolkata metro has the administrative status of a zonal railway, though it

does not come under the seventeen railway zones.

The Suburban trains in Mumbai handle more rush then any other suburban

network in India. The network has three lines via, western, central and harbor. It's

considered to be the lifeline on Mumbai. On 11 July 2006 six bombs were set off on these

trains, targeted at the general public

Freight

IR carries a huge variety of goods ranging from mineral ores, fertilizers and

petrochemicals, agricultural produce, iron & steel, multimodal traffic, and others. Ports

and major urban areas have their own dedicated freight lines and yards. Many important

freight stops have dedicated platforms and independent lines.

Indian Railways makes 70% of its revenues and most of its profits from the

freight sector, and uses these profits to cross-subsidies the loss-making passenger sector.

However, competition from trucks which offer cheaper rates has seen a decrease in freight

traffic in recent years. Since the 1990s, Indian Railways has switched from small

consignments to larger container movement which has helped speed up its operations. Most

of its freight earnings come from such rakes carrying bulk goods such as coal, cement,

food grains and iron ore.

Indian Railways also transports vehicles over long distances. Trucks that carry

25
goods to a particular location are hauled back by trains saving the fresh food and

vegetables. Recently Indian Railways introduced the special 'Container Rajdhani' or

CONRAJ, for high priority freight. The highest speed notched up for a freight train is

100 km/h (62 mph) for a 4,700 metric ton load.

Recent changes have sought to boost the earnings from freight. A privatization

scheme was introduced recently to improve the performance of freight trains. Companies

are being allowed to run their own container trains. The first length of an 11,000km freight

corridor linking India's biggest cities has recently been approved. The railways have

increased load, limits for the system's 220,000 freight wagons by 11%, legalizing

something that was already happening. Due to increase in manufacturing transport in India

that was augmented by the increase in fuel cost, transportation by rail became advantageous

financially. New measures such as speeding-up the turnaround times have added some 24%

to freight revenues.

NOTABLE TRAINS AND ACHIEVEMENTS

The Darjeeling Himalayan Railway is a World Heritage Site, and one of the few

steam engines in operation in India.

The Darjeeling Himalayan Railway, a narrow gauge train with a steam locomotive

is classified as a World Heritage Site by UNESCO. The-route started earlier at Siliguri and

now at New Jalpaiguri in the plains in West Benga] and traverses tea gardens en route to

Darjeeling, a hill station at an elevation of 2,134 meters (7,000 ft). The highest station in

this route is Ghum. The Nilgiri Mountain Railway, in the Nilgiri Hills in southern India, is

also classified as a World Heritage Site by UNESCO.£4] It is also the only rack railway in

India. The Chatrapati Shivaji Terminus (formerly Victoria Terminus) railway station

26
in Mumbai is another World Heritage Site operated by Indian Railways.

The Palace on Wheels is a specially designed train, lugged by a steam engine, for

promoting tourism in Rajasthan. The Maharashtra government did try and introduce the

Deccan Odyssey along the Konkan route, but it did not enjoy the same success as the Palace

on Wheels. The Samjhauta Express was a train that ran between India and Pakistan.

However, hostilities between the two nations in 2001 saw

the line being closed. It was reopened when the hostilities subsided in 2004. Another

train connecting Khokhrapar (Pakistan) and Munabao (India) is the Thar Express that

restarted operations on February 18, 2006; it was closed down after the 1965 Indo-Pak war.

The Kalka Shimla Railway till recently featured in the Guinness Book of World Records

for offering the steepest rise in altitude in the space of 96 kilometers.

The Lifeline Express is a special train popularly known as' the "Hospital-on-

Wheels" which provides healthcare to the rural areas. This train has a compartment that

serves as an operating room, a second one which serves as a storeroom and an additional

two that serve as a patient ward. The train travels around the country, staying at a

location for about two months before moving elsewhere.

Among the famous locomotives, the Fairy Queen is the oldest running locomotive in

the world today, though the distinction of the oldest surviving locomotive belongs to John

Bull. Kharagpur railway station also has. the, distinction ol' being the world's longest

railway platform at 1Q72 in (3,517 ft). The Ghum station along the Darjeeling Toy

Train route is the second highest railway station in the world to be reached by a

steam loco motive.[6] Indian Railways operates 7,566 locomotives; 37,840 Coaching

vehicles and 222,147 freight wagons. There are a total of 6,853 stations; 300 yards; 2,300

27
goods-sheds; 700 repair shops and a total workforce of 1.54 million.(7]

ORGANISATIONAL STRUCTURE

Indian Railways is owned and controlled by the Government of India, via the

Ministry of Railways, but it is not a company. It is a department of the Govt. of India.

The Railway Ministry is currently headed by Mamata Benerji, the Union Minister for

Railways and assisted by two junior Ministers of State for Railways, K.H. Muniyappa and E.

Ahamed, chairman Railway Board, S.M. Sharma, Indian Railways is administered by the

Railway Board, which has six members and a chairman.

Each of the sixteen zones is headed by a General Manager (GM) who reports

directly to the Railway Board. The zones are further divided into divisions under the

control of Divisional Railway Managers (DRM). The divisional officers of engineering,

mechanical, electrical, signal & telecommunication, accounts, personnel, operating,

commercial and safety branches report to the respective Divisional Manager and are lit

charge of operation and maintenance of assets. Further down the hierarchy tree are the

Station Masters who control individual stations and the train movement through the track

territory under their stations' administration. In addition to the zones, the six production

units (PUs) are each headed by a General Manager (GM), who also reports directly to the

Railway Board.

In addition to this the Central Organization for Railway Electrification-(CORE),

Metro Railway, Calcutta and construction organization of N F Railway are also

headed by a GM. CORE is located at Allahabad. This organization undertakes

electrification projects of Indian Railway and monitors the progress of various

electrification projects all over the country. Apart from these zones and production units, a

number of Public Sector. Undertakings (PSU) are under the administrative control of the

28
ministry of railways. These PSU's are:

 Dedicated Freight Corridor Corporation of India

 Indian Railways Catering and Tourism Corporation

 Konkan Railway Corporation

 Indian Railway Finance Corporation

 Mumbai Rail Vikas Corporation

 Railtel Corporation of India - Telecommunication Networks

 RITES Ltd. - Consulting Division of Indian Railways

 IRCON International Ltd. - Construction Division

 Rail Vikas Nigam Limited

 Container Corporation Limited

 Centre for Railway Information Systems is an autonomous society under Railway

Board, which is responsible for developing the major software required by Indian

Railways for its operations.

29
HISTORY OF RAILWAYS

16th April, 1853………….. The Beginning

The first railway on Indian sub-continent ran over a stretch of 21 miles from

Bombay to Thane. The idea of a railway to connect Bombay with Thane, Kalyan and with

the Thal and Bhore Ghats inclines first occurred to Mr. George Clark, the chief engineer of

the Bombay Government, during a visit to Bhandup in 1843.

The formal inauguration ceremony was performed on 16th April 1853; When 14

railway carriage carrying about 400 guests left Bori Bunder at 3:30 pm “amidst the loud

applause of a vast multitude and to the salute of 21 guns”.

The first passenger train steamed out of Howrah station destined for Hoogly a

distance of 24 miles, on 15th August, opened to public traffic, inaugurating the beginning

of railway transport on the Eastern side of the sub-continent.

In south the first line was opened on 1st July, 1856 by the Madras Railway

company. It ran between veyasarpandy and Walajah road (Arcot), a distance of 63 miles.

In the north a length of 119 miles of line was laid from Allahabad to Kanpur on 3rd march

1959. The first section from Hathras Road to Mathura Cantonment was opened to traffic

on 19th October, 1875. These were the small beginnings which is due course developed

into a network of railway lines all over the country. By 1880 the Indian Railway system

had a route mileage of about 900

30
COMPANY PROFILE

INDIAN RAILWAYS, the premier transport organization of the country is the

largest rail network in Asia and the world’s second largest under one management

INDIAN RAILWAYS RUNS AROUND 11,000 TRAINS EVERYDAY, OF WHICH

7,000 ARE PASSENGER TRAINS

Indian Railways is a multi-gauge, multi-traction system covering the following:

TRACK KILOMETERS

Broad Gauge (1676mm) -- 86,526


Meter Gauge (1000mm) -- 18,529
Narrow Gauge (762/610mm) -- 3,651
Total 108,706

Locomotive -- 7,566
Coaching Vehicles -- 37,840
Freight Wagongs -- 222,147
Stations -- 6,853
Yards -- 300
Good sheds -- 2300
Repairs shops -- 700
Workforce -- 1.54 Millions

Indian Railway is one of the biggest Rail road system in the World operated and

maintained under single management. It is both a Government department as well as a

commercial undertaking expected to be run on commercial lines. As a Government

department, Indian Railway is expected to meet the social obligations by carrying the

traffic at subsidized rates and at the same time Indian Railway is expected to achieve

31
profitability to meet its revenue as well as capital requirements for its operations

maintenance & expansion needs.

The Network of Indian Railway is spread over 63000 routes Km spread into about

7000 stations having a staff formation of 14lakh employees. Indian Railway carries an

estimated passenger Traffic of 5700 millions of passengers in the year 2005-06. It carries a

wide range of commodities over the system to cater to need of industry, thus helping the

economic development of the country. Indian Railway is expected to carry during 2007-08

785 million tons freight Traffic bringing about earnings of Rs.47000 corers and the overall

Gross earnings from passengers, other coaching goods earnings are targeted to touch

Rs.71000 corers in the year 2007-08

The financial viability of Indian Railway is judged by its operating Ratio-a ratio of

total working expenses divided by gross earnings and expressed as percentage. The

operating ratio of Indian Railway during 2007-08 (audited figures) stood at 83.2% & for

2008&09 the operating ratio is budgeted or targeted at 79.6%.

TURNAROUND OF INDIAN RAILWAY

Indian Railways during last 5years had adopted new financial and marketing

strategies its main emphasis was increased volumes, cutting the costs and improve the

financial performance by better utilization of existing resources & assets. The significant

feature appreciated Economies, trade & General public was that Indian Railway did not

increase the fares & freights over couple of years but improved it financial performance by

ending up in surplus of Rs.20 thousand corers during the year 2008-2009.

Some of the methods adopted below are as under :

 Carry more loads in the existing wagons

32
 Adopt different marketing strategies by inviting public and private partnership,

joint venture etc.

 By adopting e-ticketing, leasing of space in private to private parties Outsourcing

of activities like maintenance of stations, catering services that helped in reduced

manpower cost and increase earnings.

 Leasing of vacant land for commercial purpose.

 Inviting industry to provide wagons at their cost.

 Increase in capacity by successive replacement of first class coaches into AC II tier

and AC III tier.

 Introduction of Intercity express Trains and adding more coaches to existing trains.

NATIONAL RAIL VIKAS YOJANA

With a view to complete strategically important Projects within a stipulated period

of time, a non-budgetary investment initiative for the development of Railways has been

launched. Under the scheme all the capacity bottlenecks in the critical sections of the

railway network will be removed at an investment of Rs.15, 000 crores over the next five

years. These projects would include:

33
 Strengthening of the golden Quadrilateral to run more long-distance mail/express

and freight trains at a higher speed of 100 kmph. Strengthening of rail connectivity to

ports and development of multi-modal corridors to hinterland.

 Construction of four mega bridges – two over River Ganga, one over River

Brahmaputra, and one over River Kosi.

 Accelerated completion of those projects nearing completion and other important

projects.

History of Vijayawada Division

It was created on 2 October 1966 as the ninth zone of Indian Railways. The six divisions

of this railway have a total 5,752 route kilometers of track. Current General Manager of

S.C. Railway is Mr. M. S. Jayant, an officer of IRTS. From the days of steam-hauled

locomotives and wooden plank seats, South Central Railway has come a long way,

34
modernizing its system with the state of the art high-powered Diesel and Electric

Locomotives, high speed telescopic Passenger Coaches, and higher axle load wagons,

higher capacity track in all important routes, LED based multiple aspect color light

signaling with panel interlocking & solid state interlocking, and digital microwave and

optic fiber cable communication system, ISDN exchanges etc. Over the years, South

Central Railway has attained sufficient transportation output with adequate infrastructure

development and technological upgrading to serve the regions in its jurisdiction. Safe

operation of trains, expansion of network, modern passenger amenities, punctuality of

trains, courteous service and cleanliness in stations and trains remain always the thrust

areas of this Railway. Being a service oriented organization, South Central Railway

provided Computerized Passenger Reservation System at 85 Stations/locations covering

96% of the berths available. In the arena of information dissemination to the rail

customers, it has provided "139" Interactive Voice Response System (IVRS) for

Reservation and train enquiry, National Train Enquiry System (NTES) for real-time

information on movement of trains, Passenger Operated Enquiry Terminals (POET) with

information on availability of accommodation and confirmation and Close Circuit

Television (CCTV) for real time reservation availability status at all important stations in

its system.

The Guntur Junction of Guntur Division

35
For mass movement of freight, S.C. Railway has introduced high horse powered Diesel

and Electric Locomotives and high speed, higher Axle load Box-N-Wagons. Today, South

Central Railway plays a pivotal role as a catalyst for agricultural and industrial

development in the Southern peninsula apart from fostering the growth of trade and

commerce including import/export through ports by connecting sea ports with their hinder

land and inland container depots. Its reliable and comfortable passenger services for long

and short distance travel by introducing many super fast and inter city trains helps

transform the society by catering to their personal, business, educational and tourism

purposes. South Central Railway was formed on 2 October, 1966, by grouping the

Vijayawada and Hubli Divisions of Southern Railway and Secunderabad and Solapur

Division of Central Railway. Jurisdictional adjustments were made in October, 1977, by

merging Guntakal Division of the Southern Railway with South Central Railway and

transferring Solapur Division back to Central Railway. Secunderabad Division was split in

February, 1978 into two Divisions Secunderabad and Hyderabad to facilitate effective

operational and administrative control. On 1 April, 2003, the newly formed Guntur

division and Nanded Division of South Central Railway became operational and Hubli

Division was transferred to the newly formed South Western Railway. Presently, the

South Central Railway has six divisions, namely Secunderabad, Hyderabad, Vijayawada,

Guntur, Guntakal and Nanded with 5752 Route km of which 1604 Route km are

electrified. Vijayawada is the largest railway junction in South India and the most

important station of the South Central Railway.

36
BUDGETARY CONTROL

INTRODUCTION

Planning has become the primary function of management these days. Most of the"

planning relates to individual situations and individual proposals. However, this has to

37
be supplemented and reinforced by over all periodic planning followed by continuous

comparison with the actual performance with the planned performance.

Budgets are nothing but expressions, largely in financial terms, of,

management's plans for operating and managing the enterprise during specific

periods of time. Budgetary control has, therefore, become an essential tool of

management for controlling costs maximizing profits.

MEANING & DEFINITION OF BUDGET & BUDGETARY CONTROL

What is Budget?

A statement of estimated annual receipt and expenditure whether, on capital or

revenue account of central government is prepared by the railway board. In other words it can

be said that under (article 112) of constitution of India, the president will call upon a

statement from Railways showing the estimated income and the out-lay amount that has to

cross the Consolidated Fund of India. These statements are known as 'Budget'.

MEANING OF A BUDGET

A budget is a detailed plan of operations of some specific future period. It is an

estimate prepared in advance of the period to which it' applies. It acts as a business

barometer as it is a complete programmer of activities of the business for the period

covered.

According to Gordon and Shilling law budget may be defined as "a predetermined

detailed plan of action developed and distributed as-a guide to current operations and as a

partial basis for subsequent evaluation of performance."

The Chartered Institute of Management Accountants, London, defines a budget as "a

38
financial and/ or quantitative statement, prepared prior for a defined period of time, of the

policy to pursued during that period for the purpose of attaining a given objective."

NATURE OF BUDGETARY CONTROL

Budgetary control is the process of determining various budgeted figures for the

enterprise for the future period and then comparing the budgeted figures with the actual

performance for calculating variances, if any. First of all budgets are prepared and then

actual results are recorded. The comparison of budgeted and actual figures will enable the

management to find out description and take remedial measures at a proper time. The

budgetary control is a continuous process, which helps in planning and co ordination. It

provides a method of control too.

The Chartered Institute of Management. Accountants, London, defines budgetary

control as 'the establishment of budgets relating to the responsibilities of executives to

the requirements of a policy, and the continuous comparison of actual and budgeted

result, either to secure individual action the objective of that policy or to provide a basis

for its revision."

According to J.A. Scott, "it is the system of management control and accounting in

which all operations are forecasted and so far as possible planned ahead, and the actual

results compared with forecasted and planned ones."

BUDGET, BUDGETING AND BUDGETARY CONTROL

A budget is a blue print of a plan expressed in quantitative--terms. Budgeting is a

technique for formulating budgets. Budgetary control, on the other hand, refers to the

principles, procedures and practices of achieving given objectives through budgets.

According to Rowland and William have differentiated the three terms as;

39
"Budget are the individual objectives of a department, etc., where as Budgeting may be

said to be the act of building budgets.' Budgetary control embraces all and in addition

includes the science of planning the budgets to affect an overall management tool for the

business planning and control."

DIFFERENCE BETWEEN BUDGET & BUDGETTARY CONTROL

1. The budget is an act of planning whereas budgetary control is an act of controlling.

2. The budget concerns itself with the future. Budgetary control is

however concerned with the present activities although it is prepared on the basis of

data collected from the past budget. But the activities that the budgetary control

involves are not limited to that budget only. It is also related to the questions as to

how far the budget can effectively utilized in future.

3. The budget fixes the target and budgetary control helps to arrive at that target.

4. The budget fixes the target and budgetary control to determine the variation

between the budget and the actual performance and analyse the reasons for the

variations. They are extremely useful at the time of preparing a revised budget.

5. The actual performance is measured -not by the budget but by the budgetary

control.

OBJECTIVES OF BUDGETARY CONTROL

Budgetary control is essential for policy planning and control. It also acts as an

instrument of co-ordination. The main objectives of budgetary control are as follows:

 To ensure planning for future by setting up various budgets. The requirements and

40
expected performance of the enterprise are anticipated.

 To co-ordinate the activities at different departments.

 To operate various cost centers and departments with efficiency and economy.

 Elimination of wastes and increase in profitability.

 To anticipate capital expenditures for future.

 To centralize the control system.

 Correction of deviations from the established standards.

 Fixation of responsibility of various individuals in the organization.

CHARACTERISTICS OF BUDGETING

 A good budgeting system should involve persons at different levels

while preparing the budgets. The subordinates should not feel any imposition of

them.

 There should be a proper fixation of authority and responsibility. The delegation of

authority should be done in a proper way.

 The targets of the budgets should be realistic; if the targets are difficult to

be achieved then they will not ensure' the persons concerned.

 A good system of accounting is also essential to move the budgetary successful.

 The budgeting system should have a whole-hearted support of the top management.

 The employees should be imparted budgeting education. There should be meetings

and discussions and the targets should be explained to the employees concerned.

 A proper reporting system should be introduced; the actual result should be

promptly reported so that performance appraisal is undertaken.

41
CLASSIFICATION AND TYPES OF BUDGETS

The budgets are usually classified according to their nature. The following are the

types of budgets, which are commonly used.

a) Classification According to Time:

1. Long-term Budgets

2. Short-term Budgets

3. Current Budget

b) Classification of the Basis of Function:

1. Operating Budgets

2. Financial Budgets

3. Master Budgets

c) Classification on the basis of Flexibility:

1. Fixed Budget

2. Flexible Budget

CLASSIFICATION ACCORDING TO TIME

1. Long Term Budgets

The Budgets are prepared to depict long term planning of the business. The period of

long term budgets various between five to ten years. The long term planning is done by

the top'-level management and generally it is not known to lower levels of management.

Long-term budgets are prepared for some sectors of the concern such as capital

expenditure, research and development, long-term finances etc. These budgets are useful

for those industries where gestation period is long i.e.,-machinery, electricity, and

42
organization.

2. Short term Budgets

These budgets are generally for one or two years and are in the form of monetary

terms. The consumer's goods industries-like sugar, cotton, textiles, etc., use short-term

budget.

3. Current Budget

The period of current budget is generally of months and weeks. The budgets relate to

the current activities of the business. According to I.C.W.A. London. "Current budget is a

budget which is established for use over a short period of time and is related to

current conditions".

CLASSIFICATION ON THE BASIS OF FUNCTION

Budgets can be classified on the basis of functions they are meant to perform. Their

number depends upon the size and nature of the business. The following are the usual

functional budgets:

1. Sales Budget

The budget forecasts total sales in terms of quantity, value, items, periods, areas

etc.

2. Production Budget

The budget is based on sales budget. It forecasts quantity of production in terms of

items, periods, areas, etc.

3. Cost of Production Budget

The budget forecasts the cost of production. Separate budgets are prepared

43
for different elements of cost such as direct materials budget, direct labor budget,

factory overheads budget, office over heads budgets, selling and distribution overheads

budget, etc

4. Purchase Budget

The budget forecasts the quantity and value of purchases required for

production. It gives quantity-wise, money-wise and period-wise information about the

materials to be purchased.

5. Personnel Budget

The budget anticipates the quantity of personnel required during a period for

production activity. This may be further split up between direct and indirect personnel

budgets.

6. Research Budget

The budget relates to the research work to be done for improvement in quantity

of the products or research for new products.

7. Capital Expenditure Budget

The budget provides a' guidance regarding the amount of capital that may be

required for procurement of capital assets during the budget period,

8. Cash Budget

The budget is a forecast of cash position by time period for a specific duration of

time. It states the estimated amount of cash receipts and cash payments, etc.

9. Master Budget

It is a summary budget incorporating all functional budgets in capsule form. It

interprets different functional budgets and covers within its range the preparation of

projected income statement and balance sheet.

44
I. OPERATING BUDGET

The budget shows planned operations for the forthcoming period, including

revenues, expenses and related changes in inventory. It covers in its ambit Sales Budget,

Production Budget, Cost of Production Budget, etc. Thus, it is the principal part of Master

Budget of the business.

The operating budget usually consists of

i) Programmed budget and

ii) Responsibility budget

A. PROGRAMMED BUDGET

It consists of expected revenues and costs of various products or projects that are

termed as the major programmers of the firm. Such a budget can be prepared for each

product time or project showing revenues, Costs and the relative profitability of the

various programmers. Programmer budgets*are thus useful in locating areas where efforts

may be required to reduce costs and increase revenues. They are also useful in determining

imbalances and inadequacies in programmers so that corrective action may be taken in

future.

B. RESPONSIBILITY BUDGET

It is a budget, which identifies the revenues and costs, with an individual

responsible for their incurrence. Such a budget is an excellent control device since it

identifies with the individual only such revenues and costs which are controllable by him.

The regarding the actual results are collected from different operations and compared with

the budgeted figure to find out whether the individual has what he expected.

45
CLASSIFICATION OF THE BASIS OF FLEXIBILITY

The fixed budgets are prepared for a given level of activity, the budget is prepared

before the beginning of the financial year, if the financial year starts in January then the

budget will be prepared a month or two earlier i.e. November or December. The charge in

expenditure arising out of the anticipated charges will not be adjusted in the budget. There,

is a difference of about twelve months in the budgeted and actual figures. According to

I.C.W.A. London, "Fixed budget is designed to remain unchanged irrespective of the

level of activity actually attained". Fixed budgets are suitable under static

conditions. If sales, expenses and costs can be forecasted with greater accuracy

then this budget can be advantageously used.

FLEXIBLE BUDGET

A flexible budget consists of a series of budgets for different level of activity.

It therefore, various with the level of activity attained. A flexible budget is prepared

after taking into consideration unforeseen charges in the conditions of the Business.

A flexible budget is defined as a budget, which by recognizing the difference

between fixed, semi fixed and variable cost is designed to change in relation to the

level of activi

RECENT DEVELOPMENT IN BUDGETING

46
Zero-Based Budgeting

Zero-base Budgeting is a view technique designed to revitalize budgeting.

This technique was first used by the U.S. Department of Agriculture in 1961.

Texas Instruments, a multinational company, pioneered is use in the private sector. It

was Peter A. Pyhrr who designed its logical framework in 197O.The technique suggests

that an organization should not only make decision about the proposed new

programmers but it should also, from time to time, review the appropriateness of the

existing programmers. Such review should particularly be done of such responsibility

centers where there is relatively high proportion of discretionary costs.

Performance Budgeting

Performance budgeting involves evaluation of the performance of the organization

in the context of both specific as well as overall objectives of the organization. According

to the National Institute of Bank Management, performance budgeting technique is, "the

process of analyzing, identifying, simplifying and crystallizing specific performance

objectives of a job to be achieved over a period in the framework of organizational

objectives, the purpose and objectives of the job. The technique is characterized by its

specific direction towards the business objectives of the organization."

REQUISITION FOR A SUCCESSFUL BUDGETARY CONTROL

SYSTEM

1. Clarifying Objective

The budgets are used to realize objectives of the business. The objectives must be

47
clearly spelt out so that budgets, are properly, prepared. In the absence of clear goals, the

budgets will also be unrealistic.

2. Proper Delegation of Authority and Responsibility

Budget preparation and control is done at every level of management. Even

though budgets are finalized at top level but involvement of persons from lower, levels

of management are essential for their success. This necessitates proper delegation of

authority and responsibility.

3. Proper Communication System

An effective system of communication is required for a successful' budgetary

control. The flow of information regarding budgets should be quick so that these are

implemented. The upward communication w i l l help in knowing the difficulties in

implementation of budgets.

4. Budget Education

The employees should be properly educated about the benefits at budgetary system.

They should be educated about their "role in the success of this system. The employees may

not take budgetary control only as a control device but it should be used as a tool to

improve their efficiency.

5. Participation of all Employees

Budgeting is done by every segment of the business. It will also require the

active participation" and involvement of all employees. In practice the budgets are to be

48
executed at lower levels of management. Those for whom the budgets are framed should be

actively associated with their preparation and execution. The employees, on the basis of

their past experience, may give more practical and useful suggestions.

6. Flexibility

Flexibility in budgets is required to make them suitable under changed

circumstances - Budgets are prepared for the future, which is always uncertain. Even

though budgets are prepared by considering the future possibilities but still some

occurrences on may necessitate more appropriate and realistic.

7. Motivation

Budgets are to be implemented by human beings. Their successful implementation

will depend upon the interest shown to improve their working so that budgeting is

successful.

ADVANTAGES OF BUDGETARY CONTROL

The budgetary control system helps in fixing the goals for the organization as

whole as concerned efforts are made for its achievements. It enables economies in the

enterprises. Some of the advantages of budgetary' are as follows.

Maximization of Profit

The budgetary control aims at the maximization of profits of the enterprise. To

achieve this aim, a proper planning and co-ordination of different functions are

49
undertaken. There is a proper control over various capital and revenue expenditure. The

resources are put to the best possible use.

Co-ordination

The working of different departments and sections is properly coordinated.

The budget at different departments has a bearing on one another. The co-ordination

of various executives and subordinated is necessary for achieving budgeted targets.

Tool for Measuring Performance

By providing targets to various departments budgetary control provides a tool

for measuring managerial performance. The budgeted targets are compared to actual

results and deviations are determined. The performance of each department is

reported to the top management.

Economy

The planning expenditure will* be systematic and there will be economy is

spending. The finance will fee put to optimum use. The benefits desired for the

concern will ultimately extend to industry and then to national economy.

Corrective Action

The management will be able to take corrective measures whenever there is

discrepancy in performance. The deviations will be regularly reported so that

necessary action is taken at the earliest.

50
Cost Reduction

In the present competitive world budgetary control has a significant

role to play. Every business tries to reduce the cost a production for increasing

sales.

LIMITATIONS OF BUDGETARY CONTROL

The budgetary control system is not a perfect tool. It has its own

limitations, which are as follows:

i. Opposition against the very spirit of budgeting

There will be always active and passive resistance to budgetary control as it

points efficiency or inefficiency of individuals. The opposition is due to human nature- the

tendency to resist change.

ii. Budgeting and changing economy

The preparation of a budget, which gives a realistic position of the firm's affairs

under inflationary pressure and changing government, is very difficult. Thus, the accurate

position of the business cannot estimate.

iii. Time factor

Accuracy in budgeting comes through experience. Management must not expect too

much expect too much during the development period.

iv. Not a substitute for management

51
Budget is only a management tool. It cannot substitute management. Besides that no

budgetary programmer can be successful unless adequate arrangements are made for

supervision and administration.

v. Co-operation required

The success of the budgetary control depends upon willing cooperation and

teamwork. Budget officer must have co-operation from all department managers. These

managers must feel the responsibility for achieving departmental goals laid down in the

budget.

52
BUDGETORY CONTROL IN INDIAN RAILWAYS

INTRODUCTION

Under article 226 of the Constitution of India, a Consolidated Fund is defined as

reservoir to which all the government earnings flow (credited) and from which the

expenditure of government when so authorized by the parliament is made (debited).

Central government is having consolidated fund of India.

Authorized Expenditure (Appropriation Bills)

Under the article 114(1) of Indian constitution, after the budget is voted by the

parliament and appropriations sanctioned by the president, an appropriation bill is passed.

It becomes appropriation act and this act authorizes government to withdraw money from

consolidated fund of India-to the extent sanctioned for incurring expenditure. It should

borne in mind that though the expenditure is voted by the parliament and the appropriation

sanctioned by the president.

EXPENDITURE

The expenditure is divided into two classes viz. voted and charged. Voted

expenditure is that for which the provision of funds is subject to the Vote of Parliament.

Charged expenditure is such class of expenditure for which the president accords

sanction. Two types of control, namely budgetary and financial. Budgetary control is

defined by the Institute of Cost and Management Accountants (C1MA) as:

"The establishment of budgets relating the responsibilities of executives to the

requirements of a policy, and the continuous comparison of actual with budgeted results,

53
either to secure by individual action .the objective of that policy, or to provide a basis for

its revision".

RAIL BUDGET AND FINANCE

The Railway Budget deals with the induction and improvement of existing trains

and routes, the modernization and most importantly the* tariff for freight and passenger

travel. The Parliament discusses the policies and allocations proposed in the budget. The

budget needs to be passed by a simple majority in the LokSabha (India's Lower House).

The comments of the Rajya Sabha (Upper House) are not binding, Indian Hail ways are

subject to the same audit control as other government revenue and expenditures. Based

on the anticipated traffic and the projected tariff, the level of resources required for

railway's capital and revenue expenditure is worked out. While the revenue expenditure is

met entirely by railways itself, .the shortfall in the capital (plan) expenditure is met partly

from borrowings (raised by Indian Railway Finance Corporation) and the rest from

budgetary support from the Central Government. Indian Railways pays dividend to the

Central Government for the capital, invested by the Central Government.

As per the Separation Convention (on the recommendations of the Acworth

Committee), 1924, the Railway Budget is presented to the Parliament by the Union

Railway Minister, two days prior to the General Budget, usually around 26 February.

Though the Railway Budget is separately presented to the Parliament, the figures relating

to the receipt and expenditure of the Railways arc also shown in the General Budget,

since they are a part and parcel of the total receipts and expenditure of the Government

of India. This document serves as a balance sheet of operations of the Railways during the

previous year and lists out plans for expansion for the current year.

54
The formation of policy and overall control of the railways is vested in Railway

Board comprising the Chairman, Financial Commissioner and other functional Members

for Traffic, Engineering, Mechanical, Electrical and Staff matters. As per the 2007

budget, Indian Railways earned Rs,54,600 cr. (Rs.546,000 million or US$12,300

million). Freight earnings increased by 10% from Rs.30,450 cr. (US$7,000 million) in the

previous year. Passenger earnings, other coaching earnings and sundry other earnings

increased by 7%, 19% and 56% respectively over previous year. Its year end fund balance is

expected to stand at Rs.11,280 cr. (2.54 billion US$).[9]

Around 20% of the passenger revenue is earned from the upper class segments of

the passenger segment (the air-conditioned classes). The overall passenger traffic grew 7.5%

in the previous year. In*the first two months of India's fiscal year 2006-07 (April and May),

the Railways registered a 10% growth in passenger traffic, and a 12% in passenger earnings.

The Budgets Estimates are prepared by Railways Administration for the following,

and the figures are shown in thousands of rupees:-

A) Earnings Estimates (Receipts)

B) Revenue Budget (demand Nos. 3 to 14)

C) (C) Capital Budget (demand No. 16);

(i) Works programmer

(ii) Rolling Stock programmed

(iii) Stores Transactions (demand 16, cap. 7100)

(iv) Workshop Manufacturing Suspense

(D) Civil Grants.

55
EARNINGS ESTIMATES

The Estimates for gross receipt should be prepared in thousands of rupees. The chief

Marketing Mangers are responsible for preparation of earnings estimates as they are

being in more touch with trade through marketing and sales organizations and"

responsible for regulating the rates and fares.

The accounts department will furnish all the details that are required by the

commercial branch such as actual earnings subsidiary, details of Coal, General Goods,

Military earnings etc.

The Revised estimates of earnings for the current year and budget Estimates of next

year are submitted at the same time to Railway. Board, consisting of the following break up

of Traffic Earnings under the following heads:

 Passenger

 Other Coaching

 Goods.

 Sundries

 Suspense (Traffic Accounts).

I. Traffic Earnings

a) Coaching

(i) Passengers

Air conditioned

First Class

Second Class

Total Passenger

56
(b) Goods

Coal

Other than Coal

Total Traffic earnings

II. Sundry other earnings

Total Gross Earnings

III. Suspense

Gross receipts: It includes Passengers, other coaching’s, goods, sundries

suspense-Traffic Account.

Revenue Budget (Demand Nos. 3 to 14)

The Railways Administration viz. spending authorities are required to submit to

railways board, their revised estimate for the current year and the budget estimate for the

next year at the same time in the month of November each year for working expenses,

Demand Nos. 3 to 13 and the figures are shown in thousands of rupees.

Works programmer

Spending authorities' viz. C.E. open line and G.M. are responsible for the

preparation of works budgets estimates in respect of the works chargeable to capital, DRF,

DF, DLWR, and ACF, under Demand No. 16.

Preliminary Works Programmer

The preliminary works programmer is initiated at Divisional/District level

57
in the month of June/July in respect of each work under each plan head and the works are

grouped in two categories, namely, works costing more than Rs.5 lakhs each and works

costing up to Rs.5 lakhs each. The items in the works programmer are grouped under the

following categories:

1. New Works 2.Work-in-Progress

Final Works Programmer

The Railways Board will then present theses estimates' for the railways, as a whole

before the parliament. After the vote of parliament is obtained, the allotments are made

through budget orders" to the various Zonal Railways by the Railways Board.

Rolling Stock Programmer

Like, 'Works programmer', 'Rolling Stock Programmer* is prepared annually at

two stages viz. (i) Preliminary Programmer, and (ii) Final Programmer under Demand No.

16—Assets, Acquisition, construction and replacement. The preliminary programmer is

submitted to the railways board by 15 January each year.

Rolling Stock Programmer for the year is prepared 15 to 18 months before its

commencement, it has necessarily to be based on the rough estimates of the traffic

requirements of a later period and on the condition of rolling stock. Annual Rolling Stock

programmer is a follow up of Five Years Plan formulated for Indian Railways.

PRESENTATION OF RAILWAY BUDGET

RAILWAY BUDGETING PROCEDURE

The Budget is presented to Lok Sabha in two parts, namely, the Railway

58
Budget pertaining to Railway Finance and the General 4 Budget which gives an overall

picture of the financial position of the Government of India, excluding the Railways.

The Fiscal Responsibility and Budget Management Act, 2003 and the Fiscal

Responsibility and Budget Management Rules, 2004 made under Section 8 of the Act

have come into force on 5th July, 2004.

Under Rule 4, Central government is required to lay, in the form prescribed under

the said Rule, before both the Houses of Parliament the following Statements along with

the Annual Financial Statement and Demands for Grants:

 Medium Term Fiscal Policy Statement

 Fiscal Policy Strategy Statement

 Macro-Economic Framework Statement

The Finance Minister accordingly laid these statements on the Table of Lok Sabha

in compliance with the above statutory requirement for the first time on 6 July, 2004.

The Budget is presented to Lok Sabha on such day as the President may direct.

Simultaneously, a copy of the respective Budgets is laid on the Table of Rajya Sabha. In

an election year, the Budgets may be presented twice—first to secure a Vote on Account

for a few months and later in full.

DISTRIBUTION OF BUDGET PAPERS

In (he case of the Railway Budget, the sets are distributed to members from the

Publications Counter after the Railway Minister has concluded his speech.

The sets of General Budget arc distributed to members from several Booths in the

Inner and Outer Lobbies arranged according to the Division Numbers of members. In case

59
Division Numbers have not been allotted, these booths are arranged State-wise. The budget

papers are made available to members after the Finance Minister's speech is over, the

Finance Bill has been introduced and the House has adjourned for the day.

DISCUSSION ON THE BUDGET

No discussion on Budget takes place on the day it is presented to the House.

Budgets are discussed in two stages—the General Discussion followed by detailed

discussion and voting on the demands for grants.

APPROPRIATION BILL

After the demands for grants have been passed by the House, a Bill to provide for

the appropriation out of the Consolidated Fund of India of all moneys required meeting the

grants and the expenditure charged -on the Consolidated Fund of India is introduced,

considered and passed. The introduction of such Bill cannot be opposed. The scope of

discussion is limited to matters of public importance or administrative policy implied in

the grants covered by the Bill and which have not already been raised during the discussion

on demands for grants.

The Speaker may require members desiring to take part in the discussion to give

advance intimation of the specific points they intend to raise and may withhold permission

for raising such of the points as in his opinion appear to be repetition of the matters

discussed on a demand for grant. Such advance intimation must be given before 10.00 hours

on the day the Appropriation Bill is to be taken into consideration. No action is taken on

intimations received after 10.00 hours.

No amendment can be proposed to an Appropriation Bill, which will

have the effect of varying the amount or altering the destination of any grant so made or of

60
varying the amount of any expenditure charged on the Consolidated Fund of India,

and the decision of the Speaker as to whether such an amendment is admissible is

final. An amendment to an Appropriation Bill for omission of a demand voted by the

House is out of order.

In other respects, the procedure in respect of an Appropriation Bill is the same

as in respect of other Money Bills.

[The procedure for presentation of the Budget in and its passing by Lok Sabha is

as laid down in articles 112—117 of the Constitution of India, Rules 204—221and

331-E of the Rules of Procedure and Conduct of Business in Lok Sabha and Direction

19-B of Directions by the Speaker.]

By convention the Railway Budget is presented sometime in -the third week of

February at 1200 hours after the Question Hour. The General Budget was presented by

convention, till 1998, on the last working day of February at 5 P.M. This convention was

however, changed in 1999 when the General Budget was presented at 11 A.M. Since then the

General Budget is presented at 11 A.M. on the last working day of February (except in

2000 when it was presented at 2 P.M.).

SUMMARY OF THE DATA COLLECTED

 The data collected was the statements of budget with respect to the past 5 years.

 The data collected shows the detailed information about the actual expenditure

and earnings of past 5 years.

 The data collected also shows the budgeted earnings and expenditure.

 The data collected also helps in knowing the deviations between the budgeted and

actual earnings and expenditure.

61
 Not only budgeted and actual the data also throws a light on the overall

financial performance of Vijayawada division.

 The data was sorted in the form of tables for the purpose of easy understanding.

 Even graphical representations were used wherever they are needed.

 Not only budget statements various other statements that are linked with budget

statements are also collected to make the study effective.

 Reasons for increase or decrease of various aspects in the budget are collected by

personal interaction with the employees of the department.

Demand No Demand Name

03-A General Superintendence and Service

04-B Repairs & Maintenance of permanent way & Works

05-C Repairs & Maintenance of Motive Power

06-D Repairs & Maintenance Carriage and Wagons

07-E Repairs & Maintenance Plant and Equipment

08-F Operating Expenses – Rolling stock and equipment

09-g Operating Expenses-Traffic

10-H Operating Expenses-Fuel

11-J Staff Welfare and Amenities

12-K Miscellaneous Working Expenses

13-L Provident Fund, Pension and other Retirement Benefits

62
DATA ANALYSIS AND INTERPRETATION

TABLE-1

BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR OF

2004-05 (Fig. in thousands of Rs.)

DEMAN DEMAND NAME BG FG ACTUALS

D NO. 2004-05 2004-05 2004-05


03-A Genl. Supdt. 142060 155996 154351
04-B R & M Way & Wk 742703 876390 885162
05-C R & M R.Stock 335589 365171 367259
06-D R & M M.Power 235496 261391 262413
07-E R & M P&Equip. 359077 373726 369346
08-F Optg. Exp – R.S. 445109 473304 468061
09-G Optg. Exp. – Traffic 673518 682344 692440
10-H Optg. Exp – Fuel 2133933 2254116 2251186
11-J Staff Welfare 247601 291905 300461
12-K Misc. Exp. 236371 200169 193375
13-L Retire. Benefits 1407 1610 2004
TOTAL 5552864 5936122 5946058

Bar chat showing budget grant and actual expenditure during the year of

63
2004-05

2500000
2000000 BG2004-05

1500000 FG2004-05
1000000
ACTUALS2004-
Optg. Exp

Optg. Exp
500000 05
R & M
R & M
R & M
R & M

Retire.
Misc.
Genl.

Optg.

Staff
0

0 0 0 0 0 0 0 1 1 1 1
3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3-

INTERPRETATION

The difference between the budget grant and actual expenditure with percentage and

reasons are as under :

4-B: There is an increase of 19.18% due to increase in casual renewal works.

8-F: There is an increase of 5.15% due to less allotment of B.G towards Staff P.Us of Running

staff.

9-G: There is an increase of 2.81% due to less allotment of B.G towards Staff P.Us of

Operating staff.

11-J: There is an increase of 21.35% due to increase in cost of medicine and referral cases of

Medical Department.

12-K: There is a decrease of -18.20% due to more allotment of B.G and less expenditure

under staff training and less number of exgratia cases.

64
TABLE-2

BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR OF

2005-06

(Fig. in thousands of Rs)

DEMAND DEMAND NAME BG FG ACTUALS

NO. 2005-06 2005-06 2005-06


03-A Genl. Supdt. 160486 166448 164799

04-B R & M Way & Wk 922118 954309 983013

05-C R & M R.Stock 433830 415457 420620

06-D R & M M.Power 289814 306349 308192

07-E R & M P&Equip. 434290 442573 438779

08-F Optg. Exp – R.S. 487544 588876 588471

09-G Optg. Exp. – Traffic 710343 759601 757020

10-H Optg. Exp – Fuel 2372246 2400830 2388295

11-J Staff Welfare 312830 329185 329752

12-K Misc. Exp. 196241 122781 119788

13-L Retire. Benefits 4234 5612 5570

TOTAL 6323976 6492021 6504299

Bar chat showing budget grant and actual expenditure during the year of

65
2005-06

3000000

2500000

2000000

1500000

1000000

500000

0
03-A 04-B 05-C 06-D 07-E 08-F 09-G 10-H 11-J 12-K 13-L

INTERPRETATION

The difference between the budget grant and actual expenditure with percentage and reasons

are as under :

4-B: There is an increase of 6.60% due to increase in casual renewal works.

8-F: There is an increase of 20.70% due to less allotment of B.G towards Staff P.Us of

Running staff.

9-G: There is an increase of 6.57% due to less allotment of B.G towards Staff P.Us of

Operating staff.

11-J: There is an increase of 5.40% due to increase in cost of medicine and referral cases of

Medical Department.

12-K: There is a decrease of -38.95% due to more allotment of B.G .

66
TABLE-3

BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR

OF 2006-07

(Fig. in thousands of Rs)

DEMAN DEMAND NAME BG FG ACTUALS

D NO. 2006-07 2006-07 2006-07


03-A Genl. Supdt. 180908 180141 177421

04-B R & M Way & Wk 1016729 1048444 1060952

05-C R & M R.Stock 449016 403945 400805

06-D R & M M.Power 343375 339994 340669

07-E R & M P&Equip. 509683 463215 459421

08-F Optg. Exp – R.S. 577224 565114 560339

09-G Optg. Exp. – Traffic 795981 803727 801941

10-H Optg. Exp – Fuel 2667258 2429774 2346072

11-J Staff Welfare 388496 334282 322566

12-K Misc. Exp. 135480 139192 138298

13-L Retire. Benefits 4400 8507 8592

TOTAL 7068550 6716335 6617076

*** where : BG – Budget Grant, FG – Final Grant

Bar chat showing budget grant and actual expenditure during the year

of 2006-07

67
8000000
7000000
6000000
5000000 BG 2006-07
4000000 FG 2006-07
3000000 ACTUALS 2006-07
2000000
1000000
0
Genl.

TOTAL
Retire.
R&M
R&M
R&M
R&M
Optg. Exp

Optg. Exp

Misc.
Staff
Optg.

0 0 0 0 0 0 0 1 1 1 13-L
3- 4- 5- 6- 7- 8- 9- 0- 1- 2-

INTERPRETATION

The difference between the budget grant and actual expenditure with percentage and reasons

are as under :

4-B: There is a decrease of 4.34% due to decrease in contract payments.

5-C: There is a decrease of 10.73% due to decrease in number of locos for POH during the

year under P.U-33.

7-E: There is an increase of 9.86% due to increase in expenditure towards repairs to TT

Machines under PU-28.

11-J: There is an increase of 16.97% due to increase in Quarter repair works under PU-32.

13-L: There is a decrease of 95.27% due to excess B.G allotment and more number of DLI

cases.

68
TABLE-4

BUDGET GRANT AND ACTUAL EXPENDITURE DURING THE YEAR

OF 2007-08

(Fig. in thousands of Rs)

DEMAND DEMAND NAME BG FG ACTUALS

NO. 2007-08 2007-08 2007-08


03-A Genl. Supdt. 202975 193218 193218

04-B R & M Way & Wk 998218 1065946 1065946

05-C R & M R.Stock 508958 404012 404012

06-D R & M M.Power 406556 356441 356441

07-E R & M P&Equip. 541221 490755 490755

08-F Optg. Exp – R.S. 627574 610211 610211

09-G Optg. Exp. – Traffic 937155 846293 846293

10-H Optg. Exp – Fuel 2731629 2470204 2470204

11-J Staff Welfare 373267 348690 348690

12-K Misc. Exp. 179278 158182 158182

13-L Retire. Benefits 9067 15501 15501

TOTAL 7515898 6959453 6959453

*** where : BG – Budget Grant, FG – Final Grant

Bar chat showing budget grant and actual expenditure during the year

69
of 2006-07

8000000
7000000
6000000 BG 2007-08
5000000
FG 2007-08
4000000
3000000 ACTUALS 2007-
2000000 08

1000000
0
Misc.
R&M
R&M

R&M
R&M
Optg. Exp

Optg. Exp

TOTAL
Genl.

Optg.

Retire.
Staff

0 0 0 0 0 0 0 1 1 1 13-L
3- 4- 5- 6- 7- 8- 9- 0- 1- 2-

INTERPRETATION

The difference between the budget grant and actual expenditure with percentage and reasons

are as under :

5-C: There is an increase of 20.61% due to increase in number of locos for POH during the

year under P.U-33.

6-D: There is an increase of 12.32% due to increase in repairs to Wagons.

7-E: There is an increase of 9.32% due to increase in expenditure towards repairs to TT

Machines under PU-28.

9-G: There is an increase of 9.69% due to increase in TA to Operating staff.

10-H: There is an increase of 9.57% due to increase in excess consumption of Electricity for

Traction power under PU-32.

TABLE-5

70
BUDGET AND ACTUAL EXPENDITURE DURING THE YEAR 2008-09

(Fig. in thousands of Rs)

DEMAND DEMAND NAME BG FG ACTUALS


2008-09 2008-09 2008-09
NO.
03-A Genl. Supdt. 198515 298945 300417
04-B R & M Way & Wk 1133627 1454904 1450844
05-C R & M R.Stock 494971 538723 544649
06-D R & M M.Power 402643 517032 506826
07-E R & M P&Equip. 516646 737355 750622
08-F Optg. Exp – R.S. 653873 867823 867285
09-G Optg. Exp. – Traffic 865593 1333971 1339401
10-H Optg. Exp – Fuel 2461310 2593646 2529070
11-J Staff Welfare 375655 531686 510931
12-K Misc. Exp. 189332 265259 240721
13-L Retire. Benefits 13318 28702 28526
TOTAL 7305483 9168048 9069292

Bar chat showing budget grant and actual expenditure during the year

of 2006-07

71
3000000

2500000

2000000
BG 2008-09
1500000 FG 2008-09
ACTUALS 2008-09
1000000

500000

0
03- 04- 05- 06- 07- 08- 09- 10- 11- 12- 13-
A B C D E F G H J K L

INTERPRETATION

The difference between the budget grant and actual expenditure with percentage and reasons

are as under :

There is a overall increase of 24% between budget grant and actual expenditure which is

mainly due to payment of 6th pay commission arrears having impact on all most all the

demands except 10H and 13L.

6-D: There is an increase of 26%. This is due to POH of more number of wagons besides PC

arrears.

7-E: There is an increase of 45% which is due to increase in expenditure towards repairs to

TT Machines under PU-28 besides PC arrears.

9-G: There is an increase of 55% which is mainly due to payment of PC arrears increase in

TA to commercial and Operating staff.

TABLE-6

THE OVERALL EARNINGS OF THE DIVISION

Financial Performance

72
(Fig. in crores of Rs.)

Details 2004-05 2005-06 2006-07 2007-08 2008-09


Pass. Earnings 260.98 266.53 305.86 350.18 376.96
Other Coaching 34.97 42.58 40.28 42.25 45.04
Goods 238.89 313.58 426.88 484.25 693.45
Sundries 23.38 9.82 10.98 15.59 16.58
TOTAL 558.22 632.51 784.00 891.80 1132.03

Bar chat showing the overall earnings of the division financial performance

1200

1000
Pass. Earnings
800
Other Coaching
600
Goods
400 Sundries
200 TOTAL

0
2004-05 2005-06 2006-07 2007-08 2008-09

INTERPRETATION

The total earnings of the Division for the year ending 31.03.05 is Rs.558.22 crores, for

the year 31.03.06 is Rs.632.51 Crores, for the year ending 31.03.2007 is Rs.784.00 Crores

and for the year ending 31.03.2008 is Rs.891.80 Crores, for the year ending 31.03.2009 is

Rs.1132.03 Crores. Thus there is increase progressively i.e., 24% in 06-07, 40% in 07-08 and.

TABLE-7

PERFORMANCE EFFICIENCY INDEX OF THE DIVISION

(Fig. in crores of Rs.)

Details 2004-05 2005-06 2006-07 2007-08 2008-09


Working Expenses 594.60 650.04 661.70 695.94 906.92

73
Earnings 558.22 632.51 787.00 891.70 1132.03
P.E.I% 106.51 102.77 84.07 78.05 80.10

Bar chat showing performance efficiency index of the division

1200

1000

800
Working Expenses
600 Earnings
P.E.I%
400

200

0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09

INTERPRETATION

There is a gradual increase in surplus when compared to the year 2004-05 and 2005-06.

That is to earn Rs.100/- expenditure incurred was Rs.102.77 in 2005-06, Rs.84.07 in 2006-

07, Rs.78.05 in 2007-08 and Rs.80.10 in the year 2008-09.

74
TABLE-8

TARGETED EARNINGS AND ACTUAL EARNINGS

(Fig. in crores of Rs.)

Years

Particulars 2004-05 2005-06 2006-07 2007-08 2008-09

Targeted Earnings 556.42 590.17 556.42 650.51 1102.80

Actual Earnings 558.22 632.51 784.00 891.80 1132.03

Bar chat showing targeted earnings and actual earnings

1200

1000

800
Targeted Earnings
600
Actual Earnings
400

200

0
2004- 2005- 2006- 2007- 2008-
05 06 07 08 09

INTERPRETATION

On a comparison of Targeted Earnings and Actual Earnings it can be seen that there is a

gradual increase in Actual Earnings when compared to the Actual Earnings of the year

2004-05.

75
TABLE-9

PERCENTAGE OF CHANGE IN EXPENDITURE

(Fig. in thousands of Rs)

DEMAND AE AE AE AE AE

NO. 2004-05 2005-06 2006-07 2007-08 2008-09


03-A 154351 164799 177421 193218 300417
04-B 885162 983013 1060952 1065946 1450844
05-C 367259 420620 400805 404012 544649
06-D 262413 308192 340669 356441 506826
07-E 369346 438779 459421 490755 750622
08-F 468061 588471 560339 610211 867285
09-G 692440 757020 801941 846293 1339401
10-H 2251186 2388295 2346072 2470204 2529070
11-J 300461 329752 322566 348690 510931
12-K 193375 119788 138298 158182 240721
13-L 2004 5570 8592 15501 28526
5946058 6504299 6617076 6959453 9069292

Bar chat showing percentage of change in expenditure

76
3000000

2500000
AE 2004-05
2000000
AE 2005-06
1500000 AE 2006-07
AE 2007-08
1000000
AE 2008-09
500000

0
0 0 0 0 0 0 0 1 1 1 1
3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3-
A B C D E F G H J K L

INTERPRETATION

The miscellaneous working expenses have decreased by 2% when compared to the

previous year 2007-08. The expenditure on provident funds; pensions, have increased

almost 56% in the year 2007-08 when compared to 2006-07 the expenditure on general

superintendent, operating expenses of traffic has increased to 7% in the year 2008-09. The

expenditure on repairs and maintenance of carriages and operating expenses has increased

to 8% in 2007-08. The operating expenses on fuel and expenditure on repairs and

maintenance have increased to 3% in 2008-09.

77
ANALYSIS

There is almost 42% increase in miscellaneous working expenses. The expenditure

on staff welfare increased almost 52% in the year 2008-09 when compared to 2007-08.

The expenditure on general superintendence, operating expense of fuel, operating

expenses of traffic and amenities to staff has increased to 6% in the year 2008-09. The

expenditure on repairs and maintenance of motive power, carriages and wagons, plant and

equipment has increased to 16% 2008-09. The operating expenses on rolling stock have

increased to 28% and repairs and maintenance of permanent way and works have

increased to 11% in 2008-09.

78
TABLE-10

ACTUAL EXPENDITURE FOR THE YEARS OF 2005, 2006, 2007, 2008, 2009

(Fig. in thousands of Rs)

DEMAND AE AE AE AE AE

NO. 2004-05 2005-06 2006-07 2007-08 2008-09


03-A 154351 164799 177421 193218 300417

04-B 885162 983013 1060952 1065946 1450844


05-C 367259 420620 400805 404012 544649
06-D 262413 308192 340669 356441 506826
07-E 369346 438779 459421 490755 750622
08-F 468061 588471 560339 610211 867285
09-G 692440 757020 801941 846293 1339401
10-H 2251186 2388295 2346072 2470204 2529070
11-J 300461 329752 322566 348690 510931
12-K 193375 119788 138298 158182 240721
13-L 2004 5570 8592 15501 28526

Bar chat showing actual expenditure for the years of 2005, 2006, 2007,

2008, 2009

79
3000000

2500000

AE 2004-05
2000000
AE 2005-06
1500000 AE 2006-07
AE 2007-08
1000000
AE 2008-09

500000

0
-D

-F

-H
-A

-B

-K
08
03

04

06

10

12

INTERPRETATION

The earnings of the Division have increased from 4% to 13% in 2006-07 to 2007-

08 respectively. The expenditure of the Division has also increased from 8% to 10%

during the period of the study. The Division has suffered a deficit of 3% during the period

of study. The expenditure on repairs and maintenance on plant and equipment has

increased to 19% in 2007-08. The expenditure on miscellaneous working expenses has

decreased to almost 42% in 2007-08. The operating expenses of the Division have

increased from 1% to 6% during the period of study. Out of the total expenditure of the

firm almost 40% of the expenditure will be spent for the Operating Expenses Fuel.

80
TABLE-11

PERCENTAGE OF CHANGE IN EXPENDITURE

(Fig. in thousands of Rs)

DEMAND NO. AE AE PERCENTAGE

2004-05 2005-06 OF CHANGE


03-A 154351 164799 7%
04-B 885162 983013 11%
05-C 367259 420620 15%
06-D 262413 308192 17%
07-E 369346 438779 19%
08-F 468061 588471 26%
09-G 692440 757020 9%
10-H 2251186 2388295 6%
11-J 300461 329752 10%
12-K 193375 119788 -38%
13-L 2004 5570 178%

Bar chat showing percentage of change in expenditure

81
3000000

2500000

2000000
AE
1500000
AE

1000000
PERCENTAGE OF
CHANGE
500000

0
D

H
F
B

K
8-
6-

0-

2-
4-

0
0

-500000

INTERPRETATION

When compared to the previous year 2004-05, the General Superintendence of the

division has increased by 7% in 2005-06, Fuel for by 6%, staff welfare for the year 10%,

miscellaneous working expenses by 38%, retire benefits by 178%, and Operating

expenses Traffic by 9%.

82
TABLE-12

PERCENTAGE OF CHANGE IN EXPENDITURE

(Fig. in thousands of Rs)

DEMAND NO. AE AE PERCENTAGE

2005-06 2006-07 OF CHANGE


03-A 164799 177421 7.1%
04-B 983013 1060952 7%
05-C 420620 400805 -5%
06-D 308192 340669 10%
07-E 438779 459421 4%
08-F 588471 560339 -5%
09-G 757020 801941 6%
10-H 2388295 2346072 -2%
11-J 329752 322566 -2%
12-K 119788 138298 13%
13-L 5570 8592 35%

Bar chat showing percentage of change in expenditure

83
3000000
2500000
AE
2000000
1500000 AE
1000000
P E R C E N TA G E
500000
OF C HA NGE
0
-5 0 0 0 0 0
-F
-H
-K
-B
-D
08
04

10
12
06

INTERPRETATION

When compared to the previous year 2005-06, the General Superintendence of the

division has increased by 7.1% in 2006-07, Fuel by 2% staff welfare for the year 2%,

miscellaneous working expenses by 13%, retire benefits by 35%, and Operating expenses

Traffic by 6%.

84
TABLE-13

PERCENTAGE OF CHANGE IN EXPENDITURE

(Fig. in thousands of Rs)

DEMAND NO. AE AE PERCENTAGE

2006-07 2007-08 OF CHANGE


03-A 177421 193218 8%
04-B 1060952 1065946 1%
05-C 400805 404012 1%
06-D 340669 356441 4%
07-E 459421 490755 6%
08-F 560339 610211 8%
09-G 801941 846293 5%
10-H 2346072 2470204 5%
11-J 322566 348690 7%
12-K 138298 158182 13%
13-L 8592 15501 45%

Bar chat showing percentage of change in expenditure

85
3000000

2500000

2000000

1500000

1000000

500000

0
03-A 04-B 05-C 06-D 07-E 08-F 09-G 10-H 11-J 12-K 13-L

INTERPRETATION

When compared to the previous year 2006-07, the General Superintendence of the

division has increased by 8% in 2007-08, Fuel by 7% staff welfare for the year 5%,

miscellaneous working expenses by 13%, retire benefits by 45%, and Operating expenses

Traffic by 5%.

86
TABLE-14

PERCENTAGE OF CHANGE IN EXPENDITURE

(Fig. in thousands of Rs)

DEMAND NO. AG AG PERCENTAGE

2007-08 2008-09 OF CHANGE


03-A 193218 300417 36%
04-B 1065946 1450844 27%
05-C 404012 544649 26%
06-D 356441 506826 30%
07-E 490755 750622 35%
08-F 610211 867285 30%
09-G 846293 1339401 37%
10-H 2470204 2529070 2%
11-J 348690 510931 32%
12-K 158182 240721 34%
13-L 15501 28526 46%

Bar chat showing percentage of change in expenditure

87
3000000

2500000

2000000

1500000

1000000

500000

0
03-A 04-B 05-C 06-D 07-E 08-F 09-G 10-H 11-J 12-K 13-L

INTERPRETATION

When compared to the previous year 2007-08, the General Superintendence of the

Division has increased by 36% in 2008-09, Fuel by 32% staff welfare for the year 2%,

miscellaneous working expenses by 34%, retire benefits by 46%, and Operating expenses

Traffic by 37%.

TABLE-15

COMPARITIVE ANALYSIS OF EXPENDITURE AND EARNINGS DURING

88
THE FOLLOWING YEARS

(Fig. in thousands of Rs.)

DETAILS 2004-05 2005-06 2006-07 2007-08 2008-09


EXPENDITURE 5946058 6504299 6617076 6959453 9069292
EARNINGS 5582200 6325100 7870000 8917000 11320300
Bar chat showing comparitive analysis of expenditure and earnings during the

following years

12000000

10000000

8000000
DETAILS
6000000 EXPENDITURE
EARNINGS
4000000

2000000

0
1 2 3 4 5

INTERPRETATION

On the comparison of performance of the Division for the period from 2004-05 to

2008-09 it can be seen that the Division has improved efficiency from the year 2007-08 to

2008-09 by reducing the expenditure and increasing the earnings under passengers and

goods categories. The Division has suffered losses during the years of 2004-05 to 2005-

06 because increasing expenditure and reduction in the earnings.

FINDINGS

 There is a constant increase in the earnings of the Division during the period of study.

 The earnings from passenger services have increased constantly year by year.

89
 There is also an increase in earnings from freight services during the period of

study.

 After comparing 07-08 incomes and expenditures, the division is very well improved

in reducing the expenditure and increasing the earnings. This is because of increase

Passenger and Goods services.

 The expenditure on repairs and maintenance of the division remain constant for 2

years and increased highly in 2006-07.On other hand the total expenditure slowly

increased over the years.

 The gross receipts of the firm have been gradually increasing over the years and

improved well in 2008-09.

 Railway board will suggest the spending limits (maximum limit for expenditure)

for each Demand at the time of granting the budget. Division is not supposed to cross

this limit. And Vijayawada Division is almost successful in keeping the expenditure

within

the spending limits.

 But the Division suffered losses in the year 06-07. The expenditure is more

than earnings during this period. This is mainly due to the Earnings were low with

the increase in working expenses. But the Division was successful in increasing

the Earnings during the subsequent years.

 The year 07-08 is one of the successful years because the Division is able to

recover almost all the losses that are occurred in the previous years i.e. 05-06 & 06-

07.

 There is substantial increase in the expenditure of the Division during the period of

study, where the organization is having high fuel expenditure.

90
 The earnings from passenger services have increased constantly year by year.

 There is also an increase in earnings from freight services during the period of study.

 The expenditure on repairs and maintenance of the Division remain constant for

2 years and increased highly in 2006-07. On other hand the total expenditure slowly

increased over the years.

 The expenditure on staff welfare also rapidly increased year by year.

SUGGESTIONS

 The organization was not able to increase their sundry earnings over the years. So

necessary steps have to be taken to increase the sundry earnings by implementing

91
Management techniques and managing the Assets efficiently.

 Electrifying the remaining un-electrified tracks helps in increasing the efficiency

by way of speedy transport and in reducing the costs towards HSD oil.

 The organization has to take steps to maintain cordial relations with Business

community and Industry to attract more Traffic so as to increase Earnings.

 Recruitment of Software personnel in the organization enables reduction in

expenses related to office establishment thereby increase in profits.

CONCLUSION

• Number of reviews on budget may be reduced so that it helps in reducing

paper work as well as saves man-hours.

92
• The monthly Financial Reviews are conducted to compare the performance

efficiency of the division. The results of these financial reviews are to be best

utilized by identifying areas of unnecessary expenditure so as to cortile the

same.

• Electrifying the remaining un-electrified tracks helps in minimizing the

expenditure on fuel, as it is almost 45% of total expenditure.

BIBLOGRAPHY

1. R.K. Sharma and Shashi K.Guptha ,Management accounting (principles and

practice).

93
2. Dr.S.N. Maheswari, Financial managent.

3. Blocher, Chen, Cookins, Lin, Cost Management a Strategic Emphasis, TMH,3/e

2006

4. Colin Drury, Management and Cost Accounting, Thomson-2007

5. Creswell, J. W. Qualitative inquiry and research design: choosing among five

traditions.Sage Publications. (1998).

6. Denzin, N. K., & Lincoln, Y. S. Collecting and interpreting qualitative materials.

(2nd ed.). Sage. pub( 2003).

7. Jain S.P and .Narang K.N, Cost and Management Accounting, Kalyani Publishers,

New Delhi, 2006.

8. James Jiambalvo, Managerial Accounting, John Wiley & Sons, Inc.New

Delhi,2007

9. Gummesson, E. Qualitative methods in management research. (2nd ed.). Sage.

(2000).

10. Manash Gupta, Cost Accounting Principles and Practice, Pearson Education,2006

Web site
www.indinrailways.ac.in

94

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