ALLOCATION OF EXPENDITURE AND EARNINGS Parimal Kasliwal PROFESSOR ACCOUNTS MANAGEMENT

AUTHORITY CHAPTER – VII OF FINANCE CODE VOL- I ALLOCATION OF EXPENDITURE FINANCE CODE VOL- II CLASSIFICATION OF EXPENDITURE

GENERAL PRINCIPLE OF ALLOCATION Para 701-702 of F-1 Identifying the source of finance of the expenditure. CLASSIFICATION: Recording of the expenditure. The General principles on which railway expenditure should be allocated between the six sources of finance are described in paras 703 to 715 of F-1 These principles are based on the recommendations of the RCC (Railway Convention Committee-1949) and as amended from time-to-time by successive Convention Committees.

SOURCES OF FINANCE CAPITAL (BUDGETARY SUPPORT) DEPRECIATION RESERVE FUND (DRF) DEVELOPMENT FUND RAILWAY SAFETY FUND CAPITAL FUND OPEN LINE WORKS (REVENUE) OLW(R)

Capital Capital is not the capital-at-charge. Cost of land. The first cost of construction. Cost of maintenance of a section till not opened for working.

Ordinary Revenue Para – 705 of F-I All charges of repairs and maintenance. Contribution made to DRF. The cost of procurement of small items and of equipments. These powers should be exercised with great circumspection and justification for the purchase thoroughly examined so as not to place an undue burden on ordinary Revenue. In cases where (I) cost of an item of medical equipment exceeds Rs. 20,000/- and (ii) the cost of an item other than medical equipment exceeds Rs. 10,000/- the powers should not be re-delegated below the level of Heads of Department, who should exercise them in consultation with their Financial Advisers.

Important Provisions Land (Para 717 of F- I) Surveys (Para 724 of F- I) New Lines (Para 725 of F- I) New Minor Works (Para 734 of F- I) Revenue Sidings (Para 738 of F- I) Additions of Blast (Para 739 of F- I) Temporary and Experimental works (Para 740 of F- I) Maintenance of Quarter for Construction Staff (Para 741 of F- I) Rolling Stock (Para 742 of F- I) Spares (Para 750 of F- I) Replacement and Renewal (Para 753 of F- I) Renewal of Rails etc. (Para 759 of F- I) Renewal of Carriage and Brake-Vans (Para 764 of F- I) Renewal of Wagons (Para 766 of F- I)

Incidence of Pay and Allowances These are discussed in Chapter-VIII of the Finance Code Vol – I.

DRF Started w.e.f. 1-4-1924, To provide for the cost of renewals and replacements of assets. Appropriation to the fund is made on the basis of the recommendations of the Railway Convention Committee. Annual contribution to the fund is decided on the basis of an overall assessment for the whole plan period. Presently the quantum of contribution is Rs. 15,800 crores (as per BE for 2011-12). This is subject to the vote of Parliament through the "Demands for Grants" (Demand #14) on the annual budget. The full cost of replacement of an asset, including the improvement and inflationary elements, is chargeable to DRF.

Capital Fund Allocation from Revenue surplus. After appropriation to DF and Dividend. All works other than New Lines ; staff quarters and doubling.

CAPITAL FUND CREATED IN 1992-93 EXCESS AFTER APPROPRIATION TO DF IS CREDITED TO THIS. WITH A VIEW TO CREATE INFRASTRUCTURE FROM INTERNAL RESOURCES. For the year 2011-12, Appropriation of Rs. 2858 Crs. and Withdrawal of Rs. 3700 Crs. Is budgeted.

Development Fund Started as a Railway betterment fund in 1946 Renamed as Development Fund with effect from 1-4-1950. It is financed by crediting to it a part of surplus (excess of Revenue Receipts over revenue expenditure including dividend) as voted by Parliament through 'Demands for Grants' (Demand #14). It is utilized for meeting expenditure on various items of Passenger and Other Railway users' amenity works; staff welfare works, un-remunerative operating improvement works and safety works etc., costing more than Rs.10 lakhs each. BE 2011-12 provides for expenditure of Rs. 2400 Crores from this fund.

Deveopment Fund (Contd.) (Para – 711 & 338 of F-I) DF I – Passenger amenities works Waiting Halls. Drinking Water Refreshment Rooms, Retiring Rooms and Vendor Stalls. WC Hedges, Seats, Shade, trees. Improvement to existing coaches. Lighting and Fan on the platform Computerized PRS DF II- Labour Welfare Works Hospitals, Dispensaries and Schools. Institutes, Recreation Room, Sports Ground and Libraries. Staff quarters for Group “C” and “D”.

DF- Contd. DF III- Unremunerative Projects for improvement of Operational efficiency. Works arising out of the need for keeping operational methods up to the latest requirements and standards, viz.— Water supply for loco traffic purpose. Removal of infringements. Improvements of curves. Loop and dead sidings. Electric lighting of sheds and stations. Modern Train Control Equipments DF IV- Safety works Automatic Warning System (AWS) Track Circuiting/Excel Counters Lifting Warriors. LC gates with signals. ROB/RUB across the Yards and Platform improvements.

Railway Safety Fund Appropriation from excess of revenue receipts over revenue expenditure (including dividend) and also by transfer of funds by Central Government from Central Road fund. This fund is used for financing works relating to conversion of unmanned level crossings and construction of ROBs/RUBs at busy level crossing (Plan Heads 29 and 30). In the budget of 2011-12, expenditure of Rs. 2000 crores is sanctioned from this fund

OLWR (OPEN LINE WORKS REVENUE) FOR SMALL VALUE WORKS, OTHERWISE CHARGEABE TO DF, THIS SOURCE IS USED. THIS IS NOT A FUND AND HENCE NO BALANCE IS CARRIED FORWARD AT THE END OF THE YEAR. IN THE BUDGET OF 2011-12, AMOUNT OF Rs. 60 CRORES IS PROJECTED.

Special Railway Safety Fund (SRSF) Pursuant to the recommendations of Railway Safety Review Committee (1998), under Mr. Justice Khanna, this fund was created w.e.f. 1.10.2001 to wipe out the arrears of renewal of over-aged assets viz. tracks, bridges, rolling stock and signalling gears, besides safety enhancement works, over a six-year period. This Rs 17,000 Crores fund comprised of Rs. 12,000 crores to be given by Central Government and Rs. 5,000 crores to be generated by Railways through safety surcharge on passenger fares. Works financed from this fund appeared in the “Green-Book”, which was a part of Budget Documents. All the railway funds are interest bearing, and are kept in deposit with the Central Government.

CLASSIFICATION / STRUCTURE OF ACCOUNTS WHAT IS IT? A DETAILED SCHEME OF RECORDING ACCOUNTS NEED FOR IT? INFORMATION FOR MEANINGFUL PRESENTATION HELPS ANALYSIS ENABLES - DECISIONS BASED ON COMPARISONS COST CONTROLS BUDGETING FORECASTS

REVENUE EXPENDITURE DEFINITION COMPONENTS ORDINARY WORKING EXPENSES (Para 324 of F-1) APPROPRIATION TO FUNDS OTHERS. FROM WHERE DO WE GET MONEY FOR REVENUE EXPENSES? Relevant References ( Page 1 & 2 of A-2 & Para 701 of F-1)

S.N Group Dem-and No. Demand Name of demand I Policy Formulation and Services common to all Railways 1. 2. Railway Board Miscellaneous Expenditure (General) II General Superintendence and Services on Railways 3. III Repairs and Maintenance 4. 5. 6. 7. Repairs and Maintenance of Permanent Way and Works. Repairs and Maintenance of Motive Power. Repairs and Maintenance of C & W. Repairs and Maintenance of plant and equipment. IV Operation 8. 9. 10. Operating Expenses – Rolling stock and equipment. Operating Expenses – Traffic Operating Expenses - Fuel V Staff Welfare, Retirement Benefits and Miscellaneous 11. 12. 13. Staff Welfare and Amenities. Miscellaneous Working Expenses. Provident Fund, Pension and other retirement benefits. VI Railway Funds and payment of General Revenues 14. 15. Appropriation to Funds. Dividend to General Revenues, Repayment of loans taken from General Revenues and Amortization of over Capitalization

DEMANDS FOR GRANTS FROM 3 TO 13 OWE . 3 TO 14 TWE 1 TO 15 REVENUE EXP 1. Railway Board 2. Miscellaneous expenditure RAILWAY ADMINISTRATION (Demands 4,5,6,7 are for Repairs and Maintenance) 4. BUILDINGS & TRACKS 5. LOCOMOTIVES 6. CARRIAGES PLANTS & EQUIPMENTS (Demands 8,9,10 are for operations) 8. ROLLING STOCK 9. TRAFFIC DEPARTMENT 10. FUEL 11. STAFF WELFARE 12. MISCELLANEOUS EXPENSES. 13. PF, Pension & other retirement benefits. 14. Appropriation to funds. 15. Dividend, Repayment of loan etc. 16. Works expenditure. FROM 3 TO 13 OWE . 3 TO 14 TWE 1 TO 15 REVENUE EXP 1 TO 16 TOTAL

Sub Divisions of Revenue Demands Demand No MINOR HEAD MINOR HEAD MINOR HEAD SUB HEAD SUB HEAD SUB HEAD DETAILED HEAD DETAILED HEAD DETAILD HEAD DETAILED HEAD

EACH DEMAND IS DIVIDED INTO : MINOR HEAD SUB HEAD DETAILED HEAD PRIMARY UNIT EXAMPLE OF REVENUE EXPENDITURE CLASSIFICATION : 04 B 223 32 ABSTRACT DEMAND No. DETAILED HEAD PRIMARY UNIT

CLASSIFICATION OF WORKS EXP. PLAN HEAD (i.e.minor head) Sub Head Detailed Head --PROCUREMENT OF ELECTRIC LOCOMOTIVE 2100—(Plan Head)-Rolling Stock 2110 (Sub Head)-Locomotives 2114(Detailed Head) –Electric

+ WORKS EXPENDITURE DEFINITION Rules for classification of expenditure under the various heads are given in chapter 7 of F-1 FROM WHERE DO WE GET MONEY FOR WORKS EXPENDITURE. DRF REVENUE DF SURPLUS CAPITAL FUND (NOW DEFUNCT) RECPT. FROM CENTRAL ROAD FUND RSF LOAN FROM EXCHEQUER CAPITAL AT CHARGE + = ONE TIME GRANT CESS ON FARES SRSF MISC. RECEIPTS OLWR

WHILE GIVING ALLOCATION OF WORKS EXPENDITURE WE GIVE SOURCES OF FINANCE & THEIR APPLICATIONS CAPITAL,,DRF, DF, SRSF etc. PLAN HEAD: e.g. DOUBLING, S&T ETC.

RULES OF ALLOCATION OF EARNINGS ABSTRACT X - COACHING EARNINGS: PASSENGER FARES, LUGGAGE CHARGES, PARCEL COLLECTIONS, LIVE STOCK BY PASSENGER TRAINS ETC. ABSTRACT Y - EARNINGS FROM GOODS TRAFFIC, GENERAL MERCHANDISE, COAL, FERTILIZERS, LIVESTOCK BY GOODS TRAINS, TRANSHIPMENT CHARGES ETC.

ABSTRACT Z SUNDRY OTHER EARNINGS, COLLECTION OF RETIRING ROOM CHARGES, RECEIPTS FROM CATERING DEPT., SALE PROCEEDS OF TREES AND GRASS ON LINE, RENT OF PLOTS GIVEN TO OUTSIDERS, TELEGRAPH EARNINGS ETC.

THANK YOU