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					                                Management for Railway Managers
Purpose: This note has been prepared as handout to participants of Integrated Course. It aims at
imparting knowledge of such managerial systems of Railways, which can be useful to them in
improving their performance. The material is expected to be covered in 4-6 lectures of one and half-
hour's duration each.

1. Introduction
    As a part of preparation for the examination for selection as an officer, you must have already read
    much of what is covered in these notes. This note and accompanying interaction in classes is
    aimed at bridging any gaps left, and emphasising how to overcome the practical difficulties faced
    in real life environment.
    Management is a MIX of KNOWLEDGE and SKILL. Both of these can be acquired with labour
    and practice. A touch of rare qualities of LEADERSHIP helps. These evolve from a variety of
    influences on the individual - from an individual's upbringing environment right from childhood to
    his own spirit and devotion (some people call it get-up-and-go!). Either way, it is a greatly
    challenging and satisfying task. There is no single formula applicable to all situations, a Manager
    has to learn the environment of his operation, understand the peculiarities of any situation and
    exercise his creativity and judgement to evolve, analyse and select from the options available
    to/generated by him.
      Right Material + Right Machine + Right Means + Right Man + Right Method = Right Job.
2. A principle for improving performance

    This is called the principle of 5Ms. Machine, here, signifies the infrastructure required to perform
    the job, which includes buildings, lighting, water, electricity, machinery and plant etc. Means
    indicate the tools, equipments, instruments etc required for carrying out the task. A right man
    should be adequately educated, trained and motivated. Right Method indicates the right instruction
    for the person to carry out his work. And, of course, perhaps the most important M, which can be
    added to it is that of Money, which encompasses all of the above, as it is required for every
    function.
    It is said in Railways, you can do anything, if you have the sanction of competent authority and
    availability of funds. As a manager, it is our business to know - what are the sources of funds for
    performing a function related to any of the previous five Ms, and who is the competent authority
    for sanctioning any desired proposal/work.
    This information is contained in some important documents, a copy of which must be possessed by
    all Railway managers. These are…
    (i)   Stores …
           Indian Railways Stores Code Vol. I & II.
    (ii) Finance …
           Indian Railways Accounts Code Vol. I & II.
           Indian Railways Financial Code Vol. I & II (Appendices).
    (iii) General …
           SOPGEN – Schedule of Powers on General matters. (Parts (a) Works Matters, (b) General, (c) Stores
             Matters, (d) Miscellaneous)
           SOPEST – Schedule of Powers on Establishment Matters (generally in two parts - for Gazetted and
             Non-gazetted employees).
           Manual of Office Procedures (MOP) (Published by Ministry of Home Affairs, and re-draft by
             Railway Board).
           Vigilance bulletins – published by all Railways and Railway Board – guide you on common pitfalls
               and preventive steps you can take/better way of doing things/cross checks you can build in etc.
Buy your own copies and keep it updated. You will be surprised to know that Mechanical Department‟s offices are
the weakest in this activity! You can buy official copies by taking ADRM‟s/CWM‟s sanction to purchase books
for official use.
    (iv) Others
           Compendium of DGS&D rate contracts (Published in January every year). You may like to subscribe
             to their monthly bulletin, in which new contracts replacing expired ones are brought out. Railway

Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                      1
            stores officers have greater powers to purchase against these and COS's rate contracts. Website:
            http://dgsnd.nic.in/.
         Industrial Products Finder (Published every year by a consortium of Indian Manufacturing
            Industries), more information available at website: http://www.industrialproductsfinder.com/.
3. RIGHT MATERIAL
    The material required for carrying out a task can be acquired in many ways in Indian Railways.
    The factors on which the method of acquiring the right material and right quantity depends on the
    cost and nature of requirement (i.e. occasional or repeated). The available choices for acquiring
    material are - Cash Imprest and pay-order purchase, Non-stock indents, and Stock Items. The
    procurement of stock items is specially organised, and groups of items for different consumers
    across an entire Railway are clubbed and purchased. Some items (like imported items) are
    purchased through bulk indents by DLW, Railway Board etc. Brief notes follow.
    Cash Imprest: The in-charge of a particular area of activity, say a Diesel shed, a workshop or a
    shop or section inside the diesel shed/workshop, may possess imprest cash provided he is of SSE
    rank at least (except in special cases, where even juniors may be allowed - in ER only Officers are
    allowed). The imprest cash can be sanctioned by DRM in a division and CWM in a workshop, up
    to Rs. 15,000/-. Cases for imprests of higher value would have to go to HQ for sanction by GM (or
    AGM on his behalf, if delegated). Multiple accounts of imprest cash may be held by an in-charge
    when circumstances so justify. A single quotation purchase up to Rs 500/- (Rs. 1000/- for Sr Scale
    independent in-charge, JA Grade and above) can be made in ER. Detailed powers are available in
    the Schedule of Powers (called SOP) of the Railway concerned.
    Pay order purchase: Officers of JA grade and above (depending on SOP) can purchase items up to
    Rs 5000/- by following the tendering process. A pay-order is made after the material has been
    received, inspected and certified satisfactory, and sent to Accounts wing for arranging payment.
    Limits are different in different Railways (consult your Railway's SOP) and higher for senior
    officers. Adequate justification for not indenting through Stores Department must be provided for
    finance concurrence.
    Tip - Use ADRM or HOD's purchase powers (which are higher) where required.
    Non-stock indent: These can be placed for an item, at most twice in a year, at an interval of six
    months. If the value of indent is below Rs. 20,000/- (Rs. 40,000/- for DGS&D rate contract items,
    for which user has to quote rate contract details in the non-stock indent in likely source(s) of
    supply) the purchase is made by Associate Stores Officer of the unit, however larger value indents
    have to be sent to HQ for purchase by HQ Stores branch. Indents above Rs 40,000/- have to be
    vetted by Accounts (they prescribe a check-list which must be carefully completed for convenience
    in vetting) before being sent to HQ for purchase. However, it is recommended that item costing
    above Rs 10,000/- and required repeatedly (every year) must invariably be stocked.
    It is best to place Headquarter indents in the month of April itself for the whole year, so that the
    full length of the financial year is available for the HQ Stores branch to procure the item, and
    chances of the material's delivery in the same year are greater. If an indent crosses across the
    financial year before its delivery and payment is made, the requisition has to come back to
    indentor for certification of "Funds availability" in the new financial year. Sensible Accounts
    officers would agree to vett and certify "Funds availability" on requisitions being sent to HQ in,
    say February or March, for the next financial year instead of current one. Departmental executive
    officer can certify funds availability himself, if he is maintaining his own liability registers.
    Inadequate or incorrect information in the indent - correct and specific description with drawing
    and/or BIS specifications as required, likely sources of supply, details of previous purchase if any,
    correct cost supported by budgetary quotation (especially if first time purchase), approval of
    competent authority as per extant instructions, specifying inspection clause (by consignee, RDSO
    or RITES, any certificates of testing required, at manufacturer's premises or otherwise) are some of
    the noteworthy points of information in an indent. In the paucity of this data, the material supplied
    may not be as per user‟s requirement. It helps to add copies of letters of reports of faulty suppliers
    to eliminate them during the tendering process.
    Tips…
       Assess and place all indents in April (start assessing in Feb; also collect budgetary quotes for
        items needing vetting) to ensure adequate time during the year for procurement, inspection


Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                     2
        and payment. If it crosses into next year – funds availability in the new financial year has to
        be given by indentor again causing delay and sometimes necessitating re-tender.
       To assess…
           list out all items (once each) indented in, say, previous three to five years.
           assess quantities required per year, quantity in hand, quantity in pipeline (likely to
            materialise).
           prepare a format for all SSEs (or section in-charges) to indicate yearly requirement (after
            teaching them how to calculate for the whole year, not just lump sum but correct
            mathematical estimates (later question if usage is very high/low).
           add 0/5/10/15/20 % margin for out-of-course requirement and delay in next indent +
            delivery.
           add backlog of requirement, if any, as per actual need.
       The assessment should be genuinely based on "life-cycle-cost". A cheaper item is preferable
        if…
           the cost of purchasing it, with
           cost of replacing (i.e. man-power, tools etc) it, and
           the cost of down-time (i.e. loss in the time for which the asset will be rendered idle due to
            additional replacements required),
        …is less than the cost of the costlier component.
         Any indents of any other shed/workshop for the same item as yours, and already well
          advanced in the stage of procurement at HQ Stores Branch, are known to you, club your
          indent with those to speed up procurement for yourself. For example, when you place an
          indent for “Lube oil drums”, another shed‟s same item‟s indent may already be tendered by
          HQ Stores.
         Buy the compendium of DGS&D rate-contracts (about Rs. 300) every year; & subscribe to
          their monthly bulletin of new tenders. DGS&D rate contracts are available for more than
          10000 items.
    Stock Items: Items are stocked after a stocking proposal (on proforma prescribed by stores
    indicating its name, description, proposed PL No., drawing number, likely sources of supply, price
    per unit, approximate annual consumption, etc) has been concurred by Accounts and
    recommended by Departmental Officer from HQ. The AAC (Approximate Annual Consumption)
    of stock items should be carefully determined by assessing the quantity fitted, say, per loco, and
    the life of the item or the schedule in which it is required to be changed. It should also cater to out-
    of-course requirements, pre-mature failures etc on a percentage basis (select from a suitable range,
    for example 0%, 5% or 10% (calculating rate of failure for every item is not feasible). The
    balance-return or stock-sheet (called by different names in different Railways) for stock items
    should be used to indicate - supply periodicity or delivery schedule (i.e. quantities to be delivered
    before such-and-such date(s), especially for items with limited shelf life). This helps in reducing
    inventory and wastage of material due to expiry on shelf.
    It is recommended to club even your non-stock items with neighbouring depots, where they are
    stocked, and from where collection is not difficult for consumer, as it reduces a lot of recurring
    paper-work for yourself as well as Stores Department.
    Planning for recurring and small value non-recurring material requirements:-
    A suggested plan for items…
    Annual Cost            If perishable             Non-perishable
    <2000                  >1 time from imprest      Once from imprest of ASO
    (Your Associate Stores Officers has single quotation purchase powers of Rs. 2000/-.)
    <5000                  Prefer Clubbing with other items Prefer clubbing for 2 or more years
    <10000                 1-2 indents               Once through ASO
    <20000                 1-2 indents through ASO Once through ASO
    <40000                 2 indents through ASO     HQ - place full annual demand (in April itself)
    >40000                 Emergency Qty only        HQ – place full demand in April itself



Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                   3
    Tips…
     Items with recurring requirement and annual consumption value above Rs 10,000/- must
         definitely be stocked (limits followed by different Railways are different, and, in fact, are
         much lower than Rs 10,000/-).
     Prefer buying to upper monetary limit (and cater to next year‟s partial demand), especially for
         non-perishable items required in continuity. This saves requirement of repeating indents, and
         much paper work for stores branch.
     The same rule for purchase through ASO. This will reduce work-load on them and they can
         give better results/attention to other/all matters.
     AVOID/Minimise repeated purchase.
     Club indents of like parts; make sets (repair kits; overhaul set; etc, e.g. A-9 overhaul kit
         comprising of …..) clubbing many small items together, required in similar quantities. ASO is
         able to purchase indents of value upto Rs. 2000/- through single quotation (i.e. direct purchase
         from his imprest), but for values from Rs. 2000 to Rs. 10000, no supplier is easily willing to
         give quotations.
         Instead of indenting 10 different items for repairs of Torque wrenches, indent a single item =
         “Torque wrench repair kit comprising of … …”. This will bring the indent value up to a
         respectable amount; besides all the items can be supplied only by genuine suppliers and
         middlemen will normally avoid.
    Bulk indents and imported items: These items have a unique peculiarity of having a long lead
    time, sometimes three years. Hence, care should be taken while preparing these indents to the
    would be requirements three years later (depending on, say, whether holding of locomotives will
    increase or decrease or are there going to be new types of locomotives added to the fleet and what
    is the material required for them). Directions from HQ, preferably written, should be taken for
    preparing such indents - usually, associate accounts office will demand HQ letter before
    concurring such indents.
    Planned purchases (for high value non-recurring requirements) through Machinery & Plant
    Programme and Rolling Stock Programme (made under Demand 16) are discussed later. These are
    required to be proposed (in the concerned programme) and after inclusion in the "Pink Book" and
    grant of funds for procurement/execution of work, they can be indented/executed. Remember that
    non-recurring requirements of small value (below Rs 1 lakh) can be made in revenue, i.e. through
    regular non-stock indents.

4. RIGHT MEANS
    The means include tools, equipment, measuring instruments, gauges etc. These should be planned
    according to the number of artisans working, and the various protection equipment, accessories,
    tools etc needed by them. The procurement of these items should be done keeping in mind the life
    of these items, and a procurement strategy drawn out to acquire these through Associate Stores
    Officer, if required annual purchase value of the item is below Rs 40,000/- and can be catered
    through two non-stock indents. Alternately, a one-time requirement may be procured through HQ
    Stores branch, if the cost is above Rs 20,000/-. However, if the item is required repeatedly (every
    year), to a purchase value of Rs 10,000/-, then a stocking proposal should be moved.
    In vetting indents meant for purchase by HQ, associate accounts shall require condemnation memo
    for bulk T&P indents.
    Greater effort is required in assessing correctly the items and their quantities needed. The effort for
    procurement can be guided by the planning suggested above in RIGHT MATERIAL. A thought
    should also be given to newer equipments and superior technological products becoming available
    in the market. It is a good idea to visit and send key supervisors to visit technological exhibitions,
    trade fairs etc held at various places. It is preferable to improve applied technology gradually and
    continuously, than to leapfrog into very advanced technology leading to "shock effect".

5. RIGHT METHOD
    The focus of right method is the issue of right instruction to the person for performing his task(s).
    Such instructions have to be prepared by a technically competent person, who should also possess
    very good drafting ability. The preparation of instruction should involve the exercise of asking the
    following questions -
     who (for whom is the instruction meant),

Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                  4
       why (what problem has been faced, or why this instruction is being issued),
       what (what is the task to be done),
       when (when or in which circumstances is this instruction to be followed),
       where (which is the right place for carrying out this instruction)
       how (how the task is to be done, with step by step instructions to collect the right tools,
        material, preparation work for the task to be performed, checks to be made, check-sheets or
        available formats to use, etc).
    Testing and improving the communication before it is actually issued or put to use is very helpful
    in eliminating areas of doubt. Try any one of your letters/instructions (if in Hindi, or even
    otherwise) on your peon and ask him to explain what he understands by it!

6. RIGHT MACHINE (Infrastructure)
    A. The arrangement for right infrastructure requires consideration for: -
        Civil engineering facilities - land, building, roof/shed, pit, platform, water, bathroom,
            cleaning area, landscaping etc.
        Electrical engineering facilities - lighting, power supply, fan, air-conditioning etc.
        Signal and Telecommunication engineering facilities - telephone, communication, walkie-
            talkie, etc.
        Mechanical engineering facilities - machines, jib/EOT cranes, jacks, vehicles, platform
            trucks, forklift trucks, battery trucks etc.
       Through the yearly (revenue) budget (Demands 1 to 15 - mainly Demands 4,5,6,7, which are
       in "Repair and Maintenance" group), the Civil, Electrical, S&T and Mechanical Departments
       can maintain the existing facilities. Minor modifications or enhancements, not costing too
       much, can sometimes be accommodated in revenue/yearly budget. They can also be done by
       placing a work order on other departments, by providing funds out of your own planned
       budget (utilising Primary Unit (PU) 99 for miscellaneous expenditure, or PU 33 for
       Miscellaneous Debits/Credits and sometimes permissible in PU 32 for contractual payments
       too). An inter-departmental work order of above Rs 50,000/- from revenue grants needs prior
       vetting by accounts.
    B. The creation of new or substantial enhancement/modification to existing facilities requires:-
        preparation of detailed proposal by Branch Officer in-charge in association with in-
            charges of other departments who may be involved, either on administrative instruction
            by PHOD/HOD/DRM/ADRM through their inspection notes or by his own initiative,
        concurrence by associate accounts (who may sometimes ask for instructions of HQ, say in
            the form of an inspection note of HOD or a separate letter etc), you can obtain ADRM‟s
            administrative approval with a clause „subject to finance concurrence‟.
        administrative approval by SAG officer (if not already taken),
        administrative approval by Head of Department in HQ,
        concurrence by HQ Accounts,
        approval by AGM/GM (GM can sanction works upto Rs. 30 lakhs subject to overall limit
            due to funds available in that year, even out-of-turn works can be sanctioned),
        concurrence by Railway Board Accounts branch (for works above Rs. 30 lakhs),
        approval by concerned Member (MM for M&P or RSP; ME for WP) of Railway Board
            for inclusion in "Pink Book" (proposals above Rs. 5 crores shall need approval of MR,
            and usually above Rs. 50 crores by Cabinet of Ministers; varies in different years),
        approval of parliament (along with Railway Budget in February's Budget Session of
            Parliament every year),
        allocation of funds for the proposal,
        preparation of detailed estimate and its vetting,
        sanction of detailed estimate,
        procurement of item or execution of work (some works are spread over several years, in
            which case, funds are allotted for the first year according to the proposed requirement by
            proposer, and in balance years as per requirement proposed every year in progress
            statements and proposal update).

Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                             5
        Powers of DRMs and GMs for sanctioning M&P, RSP, WP subject to overall limit of funds
        granted for a particular year:
                                                                 (Rs. per case)
                                       RSP                M&P                  WP
                 DRM                   NIL                 NIL               10 lakhs
                  GM                   NIL               10 lakhs            30 lakhs
             Railway Board,
             MR and Cabinet             Full               Full                Full
              of Ministers

       Some limitations in granting sanctions areas follows: -
        DRM up to Rs 10 lakhs for WP only (some Railways have not enhanced this from
           previous Rs 5 lakhs, according to Railway Board's letter); any number of cases; total
           amount should be limited to the funds granted to DRM in that year in Demand 16 by GM.
           Such proposals need not go to HQ. SrDEN of the division issues a cyclo-styled/printed
           book containing all the proposals finally sanctioned by DRM under his powers for the
           division to be carried out in that year and their costs. This booklet is called the Local
           Works Programme (LWP) or Divisional Works Programme (DWP) or Petty Works
           Programme (PWP) booklet of the division.
        GM up to Rs 30 lakhs; any number of cases; total amount should be limited to the funds
           granted to GM in that year in Demand 16 by Railway Board. Such proposals need not go
           to Railway Board. Chief Engineer (of civil engineering department) issues a printed book
           every year, which lists the proposals, sanctioned by the General Manager for the year for
           the whole Railway along with their costs. This book is called LAW (Locally Approved
           Works) Book (in Eastern Railway), GM's Zonal Works Programme (ZWP), or other
           similar name in different Railways.
        Normally, proposals up to Rs 5 crore (any number) can be sanctioned by Members of
           Railway Board (ME for WP; MM for RSP and M&P), within the funds distributed to the
           department for that year.
        Proposals up to Rs 50 crores can be sanctioned by Minister of Railways. Proposals more
           than Rs 50 crores are sanctioned by Cabinet of Ministers, headed by Prime Minister. This
           limit is altered by PM almost every year.
    C. The proposals are divided into following types: -
        Works Programme (WP) - called Divisional Works Programme (DWP) or Petty Works
           Programme (PWP) or Local Works Programme (LWP) in different Railways at
           Divisional level, LAW or ZWP at Headquarters level, and Preliminary Works Programme
           at Railway Board level; it normally includes such works in which civil engineering
           portion of cost is greater than 50%. It is finalised by Civil Engineering Department, all
           departments send their proposals to them.
        Machinery and Plant (M&P) Programme - includes such proposals, in which, greater
           than 50% of the work involved is mechanical in nature, i.e. the cost of machine, plant etc.
           For example, installation of a Pit-wheel lathe machine, which involves civil engineering
           portion of digging pit, erection of shed etc, and electrical engineering portion of lighting,
           power supply etc, both of which are far below the cost of the machine. It is finalised by
           Mechanical Engineering Department. Though permissible at Divisional and Zonal levels
           too, mostly the proposals are prepared at Railway Board level only.
        Rolling Stock Programme (RSP) - where the purchase involved is neither civil
           engineering type for WP, or mechanical engineering type for M&P; mainly it is dedicated
           to purchase/procurement of locomotives, coaches, wagons etc. Such equipment for the
           rolling stock, which is required to be purchased on one time need basis (being very costly,
           can not be accommodated in revenue budget) is also included here. It is finalised by
           Mechanical Engineering Department. The annual requirements for Production Units
           which manufacture Rolling Stock is also governed by this programme, such as, DLW,
           RCF, ICF, WAP, CLW and part of DCW.




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                               6
    D. Primary reason or Account on which proposals may be made:-
        CAPITAL account - abbreviated as CAP; works of enhancement of capacity for
             Railways, for which money is usually borrowed on a predetermined rate of interest from
             the Central Government, or other sources.
        CAPITAL FUND - abbreviated as CF; Railways own capital fund to which Railway
             appropriates some amount of its earning every year.
        DEPRECIATION RESERVE FUND account - abbreviated as DRF; Depreciation
             Reserve Fund, for replacement of old assets after their prescribed life is over.
        DEVELOPMENT FUND - abbreviated as DF; Development Fund for developmental
             works. It is further subdivided into:-
                  DF1 - Development fund for Passenger and other railway user's amenities work.
                  DF2 - Development fund for Labour Welfare Works.
                  DF3 - Development fund for non-remunerative works, improvement of operational
                  efficiency.
                  DF4 - Development fund for safety works.
        SAFETY FUND account - abbreviated as SF; for safety related works.
        OPEN LINE WORKS REVENUE account - abbreviated as OLWR; for such works
             which are to be carried out on lines already open for traffic and for which provision of
             funds has to be made in revenue budget (of the same year) itself.
        REVENUE account - other works from revenue budget.
        DEPOSIT AND OTHER WORKS - abbreviated as DPO; for works performed by
             Railways for other organisations against deposits of amounts by them for such works. For
             example, repair and maintenance of rolling stock (locomotives, wagons) of Port Trusts,
             Thermal Power Plants or repair and maintenance of track of Port Trusts, Thermal Power
             Plants etc.
    E. Preparing a proposal:-
       The preparation of proposals for new works is ordered by Railway Board/HQ (HOD or
       PHOD), and then undertaken by the corresponding officer of the executive branch. However,
       preparation of proposals for enhancement, alteration or modification of existing facilities can
       be made by the executive officer (SrDME (Diesel), CWM, SrDME(C&W) et al). A narrative
       justification for the need of the proposal has to be made by the officer. He also has to write to
       the other departments involved (Civil, Electrical, and sometimes S&T) for a joint
       survey/examination of the site, explaining the requirements and asking for preparation of
       preliminary estimates, complete with drawings and specifications etc. These are clubbed and
       compiled by the executive officer of the department that has proposed the work, and then
       moved forward.
       Administrative approval of ADRM/CWM has to be taken on the proposal before sending it for
       concurrence by Accounts. Proposals up to Rs 10 lakhs can be sanctioned by DRM (provided
       he has adequate funds left in Demand 16 for that year), and above that have to be sent to HQ.
       At HQ, administrative approval of HOD has to be taken first, then concurrence of HQ
       Accounts. GM can sanction the proposals up to Rs 30 lakhs (provided he has adequate funds
       left in Demand 16 for that year). Proposals of higher value have to be forwarded to Railway
       Board for concurrence by Accounts branch and sanction of competent authority.
       There are standard formats for preparing Works Proposals, M&P Proposals and RSP
       proposals. The formats are slightly different for proposing the work/M&P item for different
       account of proposing the work/item, and minor changes occur from Railway to Railway too.
       After receipt of the sanction of competent authority (which is communicated through the
       booklet/book printed by SrDEN in a division, Chief Engineer in HQ or Pink Book of Railway
       Board, and also indicates the funds granted for that year - as all the funds may not be granted
       at once), the executive officer prepares the detailed estimate for the entire work and gets it
       vetted by Accounts. In this, he indicates the work to be performed first (within the allotted
       funds).
       After vetting by accounts, the executive officer requests the concerned department (Civil,
       Electrical, S&T) to start the work (or that portion which has to be completed in that year).



Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                               7
    F. Important Plan Heads and Primary Units in Demand 16
       The Demand 16 is divided into Plan heads (like Minor heads, sub-heads, detailed heads for
       Demand 01 to 15 of revenue budget) and Primary Units (which are different for Demand 16,
       though they are same for Demands 01 to 15). The existing plan heads are:-
          Plan                                               Plan
                                    Purpose                                             Purpose
          Head                                               Head
            11      New Lines (Construction)                  36      Other electrical works
            12      Purchase of new lines                     41      Machinery and Plant Programme
            13      Restoration of dismantled lines           42      Workshops including Production Units
            14      Gauge conversion                          51      Staff Quarters
            15      Doubling                                  52      Amenities for staff
                    Traffic facilities - Yard remodelling             (i) Passenger Amenities
            16                                                53
                    and others                                        (ii) Other Railway users amenities.
                                                                      Investment in Government
            17      Computerisation                           61      Commercial Undertakings - Road
                                                                      Services.
                                                                      Investment in Government
            21      Rolling Stock                             62      Commercial Undertakings - Public
                                                                      undertakings.
            29      Road safety works - level crossings       64      Other Specified works
            31      Track renewal                             71      Stores suspense
            32      Bridge works                              72      Manufacturing suspense
                    Signalling and Telecommunication
            33                                                73      Miscellaneous advances
                    works
                    Taking over of line wires from P&T
            34                                                81      Metropolitan Transport Projects.
                    Dept.
            35      Electrification projects

        17, 29 and 81 have been added recently. Railway Board as per arising need may add new Plan
        Heads.
        The general way of writing allocation unit for Demand 16 is ABC 16-4100-XX, where ABC
        represents the three character code of allocation (e.g. CAP, DRF ACF etc),16 represents the
        Demand 16, 4100 represents Plan Head 41 (Machinery and Plant Programme, for any other
        Plan Head, its digits would be used, 00 should be replaced by suitable detail by looking up the
        Minor-Sub-and-Detailed head available in the appendix mentioned ahead) and XX represents
        the "Primary Unit" or "Object of Expenditure", which gives the detail of expenditure (these
        are available in Indian Railway Financial Code Vol. II - Appendices called "Classification of
        Accounts of Expenditure and Earnings). Following are the Primary Units for Demand 16…




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                              8
                                                                                               Primary
         S.No.                                Object of expenditure
                                                                                                Unit
           1      Pay and allowance of Departmental establishment                                 01
           2      Payment to casual labour                                                        02
                  Payment to contractors and others for Engineering works or supply and
           3                                                                                      03
                  erection contracts etc.
           4      Direct supply of material                                                       04
           5      Stores supplied from stock                                                      05
           6      Freight on stores                                                               06
           7      Credit for released material                                                    07
           8      Others                                                                          08
                  Transfer of debits/credits affecting capital works expenditure/suspense
           9                                                                                      09
                  account
          10      Productivity Linked bonus                                                       10

7. RIGHT MAN
    This topic is separately covered as "Human Resource Management" in two lectures in Integrated
    course, with separate Handout Notes.

8. The Additional All Encompassing M                   - MONEY
    Management of monetary resources can not be neglected. While it assumes dimensions of different
    proportion in Private sector or even Public Sector Undertakings -in Government Enterprises of the
    type of Indian Railways - it is very different. This is primarily so, because the earning departments
    are different from the spending departments, and therefore, the responsibility of spending
    departments (Mechanical being one of them, with minor exceptions at a few places), all that is
    required is to adequately foresee and plan for the funds required to carry out all activities in the
    next year.
    8.1 Budget Cycle
    For all Central Government Ministries (and State Government, too), the budget cycle begins in
    October XX (though budget estimate for next year is sent in August Review also), for the
    Financial Year April XX+1 to March XX+2 (so, if XX is 2001, XX+1 is 2002 and XX+2 is 2003).
    Since using XX, XX+1 and XX+2 will be very confusing, the Financial Year 2002-03 has been
    taken as an example.
    The Budget Estimate (BE) for Financial Year 2002-03 (FY 2002-03) is prepared by all units
    (Divisions, workshops, Production units, subsidiaries such as RITES, IRCON, CONCOR etc) in
    October 2001 and sent to their HQ through their associate Accounts office (* a preliminary
    Budget Estimate for the next Financial Year is sent in August with August Review too, but the one
    actually taken into consideration is that sent in October, along with Revised Estimate for the
    current Year). At HQ it is compiled and sent to Railway Board, where it is compiled for the entire
    Indian Railways. Members of Railway Board hold meetings with GMs, FACAOs and PHODs in
    November/December 2001, to discuss any pertinent matters. Sometimes revision is necessary by
    some Railways, PUs or RITES, CONCOR etc.
    The likely earnings and expenditure (i.e. the budget) is printed during Jan-Feb 2002, and tabled in
    the Parliament in Budget Session, which begins in the last week of Feb every year (the other
    sessions of the Parliament are Monsoon Session and Winter Session). MR introduces the budget
    with his speech. Railway budget is presented separately, followed by General Budget (which
    comprises earnings and expenditure of all other Central Government Ministries together) and is
    presented by the Finance Minister. This is so because, many years ago (around 1926), when
    Indian Railways was the largest of all ministries and its budget alone far exceeded the budget of all
    other ministries combined, it was decided to have it presented separately, and since then, though
    the number of ministries has mushroomed and their combined expenditure has also increased, the
    system has continued.
    For the budget to be approved by the Parliament, voting has to be carried out after completing
    discussions on it on issues raised by MPs. While the discussion on budget continues in the
    Parliament, a vote-on-account is passed, to let the normal business of Government continue from

Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                9
    April (generally, based on 25% of value of funds allotted for the previous year, expenditure is
    permitted in the first three months of the new Financial Year).
    Along with the Railway budget, say in Feb 2002, several other documents are also tabled in
    parliament (a copy is given to each MP), which include
          (i) MR‟s speech Part I (containing changes in current year‟s budget requiring approval of
                 Parliament, due to variations in earnings and spending during the year); and Part II
                 (introducing the budget for the next/coming year).
          (ii) A booklet explaining the budget documents for MPs;
          (iii) A booklet presenting the Performance Budget Review of Railways;
          (iv) Summary of changes in current year‟s budget.
          (v) Details of changes in current year‟s budget.
          (vi) Indian Railways proposed earnings and expenditure statement for the year 2002-03.
          (vii) Memorandum explaining changes in fares/rates.
          (viii) Summary of next year‟s revenue budget.
          (ix) Details of next year‟s revenue budget.
          (x) Summary of Demand 16 (i.e. capital expenditure) proposals (containing WP, M&P,
                 RSP).
          (xi) Preliminary Works Programme (also called "Pink Book") - containing the Works, M&P
                 and Rolling Stock Programmes for the FY 2002-03 (i.e. details of all proposed capital
                 expenditure).
          (xii) Indian Railways Year Book for the year 2000-01, along with a pocket book of key
                 statistics.
          (xiii) Indian Railways Annual Accounts for the year 2000-2001.
          (xiv) Indian Railways Annual Statistics for the year 2000-2001 (Volume I - "Operating
                 Statistics" and Volume II - "Commercial Statistics" - very useful documents which
                 provide hoards of statistical figures which can be profitably used, nowadays combined
                 into one book),
    Towards the end of budget session of Parliament, usually in end of March 2002, the budget is
    finally passed by the Parliament. The sanction of Parliament is communicated to the Ministry of
    Railways by the Ministry of Parliamentary Affairs (and that of General Budget to the Ministry of
    Finance). The Ministry of Railways communicates the sanction of budget, with any modifications
    made by the Parliament after discussions, to various Railway HQs, PUs etc in April 2002. In May
    2002, this is communicated to various Divisions of Railways. In June 2002, the Divisional
    Accounts Office communicates the grants allotted to various executive officers. Note, till June
    2002, the expenditure is carried out on Vote-on-account, usually as per 25% of last year's grants
    (which is equivalent to 3 month‟s amount).
    The actual expenditure incurred by an executive officer is registered in the associate accounts
    office by about 3-weeks delay. So, in 3rd week of July, the expenditure up to end of June becomes
    correctly known. Therefore, in August 2002 and August Review (AR) is carried out - to determine
    the expenditure in the First Quarter of the year, compare it with the proportionate 3-months grants
    (i.e. the budgetary allotment) and project the requirement for the remaining 9-months to arrive at
    the figure for the whole year and compare that with the whole year's grants by arriving at the figure
    of variation, if any. The result of this exercise is also sent to HQ through the associate accounts
    office.
    The Revised Estimate (RE) for the current year (i.e. Financial Year 2002-03) is prepared in
    October 2002, when the correct figures for 5-months (April to August) and approximate or quick
    figures for September are known, comparing it with half of Budget Allotment (i.e. proportionate
    budget), projecting the requirement for remaining six months, arriving at the total requirement for
    the whole year and comparing it with the total grants to determine any variations. At this time, the
    BE for the next Financial Year (i.e. FY 2003-04) is also prepared and sent along with this Revised
    Estimate for 2002-03 to HQ (this initiates the cycle of budget for the next year).
    A First Modification is prepared in end of December 2002 with correct figures for 8-months, and
    a Final Modification is prepared in the end of January 2003, with correct figures of 9-months.
    Usually, First and Final Modifications are sent together in end of January 2003. Finally the closing
    of accounts and closing of books for FY 2002-03 takes place in June 2003 (extra 3-months are

Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                               10
    allowed for completing entries and accounts of earnings and expenditures). These figures for the
    entire Indian Railways are then compiled and produced in the Indian Railways Annual Accounts
    for the year 2002-03, which is presented in the Parliament in the next budget session (i.e. in year
    2004).
    Relate this to the preparation of Works Programme, M&P Programme and Rolling Stock
    Programme. These proposals have to be included in the Pink Book which is presented in the
    Parliament just before the beginning of the Financial Year in which these works are proposed to be
    carried out. Since the preparations of Works Programme estimates take about a year's time, the
    works for the FY 2002-03 have to be sent to HQ in Feb 2001 itself! The M&P items take lesser
    time in finalisation, so they are required by the HQ (Mechanical Branch) in May 2001, and RSP
    items (generally prepared by the HQ itself for Locos, coaches, wagons etc) but prepared by field
    units for capital spares/parts of these rolling stock and have to be sent to HQ in Sep 2001. All these
    programme items are examined by HQ Finance and then sent to Railway Board with approval of
    GM for further inclusion in Pink Book.
    A recent notification by Railway Board communicates, that the need of planning is continuous and
    not sporadic, therefore, the proposals for capital expenditure may be forwarded round the year, at
    any time, and should be taken into consideration at the time of compiling and sending to Railway
    Board.
    Let us, in a series, cast a look at the popular formats (prescribed by Railway Board and HQ) for
    BE, AR, RE, First and Final Modification (The formats and figures provided below are sample
    only).




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                11
                               Indian Railways Institute of Mechanical and Electrical Engineering, Jamalpur, Distt. Munger, Bihar - 811 214
                                                              First and Final Modification for FY 2001-02
                                                                    ABSTRACT FOR DEMAND NO. 2                                   (Figures in Thousands of Rupees)
                                                                            Estimated
                                                                                                Final            Revised
                                                     Actual Expenditure    Expenditure
                   Primary Unit of        Primary                                           Modification       Estimate as       Variation       Remarks for
                                                     for First 9 months     for Last 3
                    Expenditure            Unit                                             estimate for        asked for      between 5 & 6      variation
                                                          2001-02          months 2001-
                                                                                              2001-02           2001-02
                                                                                02
                          1                  2                3                   4                5                6                7                8
                Salary                      01              8058                6942            15000             15715             -715
                DA                          02              3554                2946            8500              6757              -257
                PLB                         03               554                  ---            554               554                ---
                HRA                         04               243                 117             360               360                ---
                OT                          11               222                 162             384               384                ---
                NDA                         12                23                  12              35                33              +02
                CCA                         05                02                  ---             02                02                ---
                Other Allow incl TPA      13 + 07            529                 291             820               820                ---
                Fees & Honoraria            14                16                 184             200               100              -100
                Transfer & Pack allow       15                71                  01              72                58              +14
                TA                          16               429                1541            1970              2000               -30
                                         18 + 19 +
                Contingent Expenses                          333                237               570              570               ---
                                          22 + 24
                Cost of Materials from
                                            27               ---                 50               50               140              -90
                Stores
                Cost of Material -
                                            28               161                1339             1500             1500               ---
                Direct Purchase
                Contractual Payment         32              1067                 633             1700             4000             -2300
                Other Expenditure           99              1167                1033             2200             2000             +200
                                                            16429              15488            31917             35193            -3276




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                                                                            12
                               Indian Railways Institute of Mechanical and Electrical Engineering, Jamalpur, Distt. Munger, Bihar - 811 214
                                          Revised Estimate (RE) for FY 2001-02 and Budget Estimate (BE) for FY 2002-03
                                                                  ABSTRACT FOR DEMAND NO. 2
                                                                                                                                        (Figures in Thousands of Rupees)
                                                                                                                                        Cost
                                                                              Other             Transf                        Cost
                                                                                                                                         of
                                                                              Allow     Fees     er &              Contin      of               Contra
Detailed                                                                                                                               Materi             Other
                                                                              ances     and     Packin              gent     Materi              ctual
Head of     Salary    DA      PLB      HRA        OT      NDA       CCA                                    TA                           al _              Expen     Total
                                                                             includi   Honor       g               Expen       al               Payme
Demand                                                                                                                                 Direct              ses
                                                                               ng       aria    Allow               ses      from                 nt
                                                                                                                                       Purcha
                                                                              TPA                ance                        Stores
                                                                                                                                         se
Primary
             01       02       03        04       11        12       05      07, 13      14       15        16     18 - 24     27        28       32        99
 Unit
  Actual
Expendit
            13731    5388     526       359       158       30       Nil      726        29       80       1966      568       Nil       64      1524      2713     27862
  ure for
 2000-01
 Budget
Allotmen
            16000    8500     525       400       105       35       Nil      675       100       25       2500      400       100      150       700      1000     31215
   t for
 2001-02
 Revised
Estimate
            15715    6757     554       360       384       33       02       820       300       58       2000      570       140      1500     4000      2000     35193
for 2001-
    02
 Budget
Estimate
            17600    7457     604       390       414       36       ---      900       330       63       2200      620       144      1500     4400      2200     38858
for 2002-
    03




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                                                                              13
                                 Indian Railways Institute of Mechanical and Electrical Engineering, Jamalpur, Distt. Munger, Bihar - 811 214
                                          August Review Estimate (ARE) for FY 2001-02 --- ABSTRACT FOR DEMAND NO. 2
                                                        REASONS OF VARIATION WITH PREVIOUS YEAR                                     (Figures in Thousands of Rupees)
                                               For First 3 Months                   For Last 9 Months                 Total for the Year
                                                                                                                                                    Variation
   Primary Unit of                                              Actual           Actual         Estimated           Actual                                             Remarks for
                         Primary      Actual Expenditure                                                                          Requirement     between Col 7
    Expenditure                                              Expenditure      Expenditure      Expenditure       Expenditure                                            variation
                          Unit           for 2000-01                                                                              for 2001-02         &8
                                                             for 2001-02      for 2000-01      for 2001-02       for 2000-01
          1                 2                  3                    4              5                 6                7                8                9                    10
Salary                      01               5031               2530              8700            13185            13731             15715            +1984
DA                          02               1947               1201              3441            5556             5388              6737             +1369
PLB                         03                 ---                ---             526              600              526               600              +74
HRA                         04                120                 73              239              287              359               360              +01
OT                          11                 63                 99               95              61               158               160              +02
NDA                         12                 12                  8               18              22                30                30               ---
CCA                         05                 ---                01               ---             ---               ---               01              +01
Other Allow incl TPA      13 + 07             230                173              496              557              726               730              +04
Fees & Honoraria            14                 11                 09               18              491               29               500             +471
Transfer & Pack allow       15                 15                 27               65              00                80                27              -53
TA                          16                877                177              1089            1823             1966              2000              +34
                         18 + 19 +
Contingent Expenses                          135                    74            433              496               568              570              +02
                          22 + 24
Cost of Materials from
                            27                ---                   ---            ---              25               ---               25              +25
Stores
Cost of Material -
                            28                61                    ---            03              1000              64              1000             +936
Direct Purchase
Contractual Payment         32               174                  68              1350             3932             1524             4000             +2476
Other Expenditure           99               355                 353              2358             1647             2713             2000              -713
                                             9031               4793             18831            29682            27862             34475            +6613




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                                                                                 14
                                Indian Railways Institute of Mechanical and Electrical Engineering, Jamalpur, Distt. Munger, Bihar - 811 214
                                         August Review Estimate (ARE) for FY 2001-02 --- ABSTRACT FOR DEMAND NO. 2
                                           REASONS OF VARIATION WITH BUDGET ALLOTMENT/GRANT                                        (Figures in Thousands of Rupees)
                                                 For First 3 Months                  For Last 9 Months                  Total for the Year
                                                                                                                                                      Variation
     Primary Unit of                                              Actual          Budget          Estimated          Budget                                           Remarks for
                            Primary     Budget Proportion                                                                          Requirement      between Col 7
      Expenditure                                              Expenditure     Proportion for    Expenditure      Allotment for                                        variation
                             Unit         for 2001-02                                                                              for 2001-02          &8
                                                               for 2001-02        2001-02        for 2001-02        2001-02
            1                  2                3                     4              5                6                 7                8                9                10
Salary                         01              4000               2530             12000            13185            16000             15715             -285
DA                             02              2125               1201             6375             5556             8500              6737             -1743
PLB                            03               132                 ---             393              600              525               600              +75
HRA                            04               100                 73              300              287              400               360               -40
OT                             11                26                 99               79               61              105               160              +55
NDA                            12                09                  8               26               22               35                30               -05
CCA                            05                ---                01               ---              ---              ---               01              +01
Other Allow incl TPA         13 + 07            169                173              506              557              675               730              +55
Fees & Honoraria               14                25                 09               75              491              100               500             +400
Transfer & Pack allow          15                05                 27               19               00               25                27              +02
TA                             16               625                177             1875             1823             2500              2000              -500
                            18 + 19 +
Contingent Expenses                            100                    74            300              496               400              570             +170
                             22 + 24
Cost of Materials from
                               27               25                    ---            75               25               100              25               -75
Stores
Cost of Material - Direct
                               28               38                    ---           112              1000              150             1000             +850
Purchase
Contractual Payment            32              175                  68              525              3932              700             4000             +3300
Other Expenditure              99              250                 353              750              1647             1000             2000             +1000
                                               7805               4793             23410            29682            31215             34475            +3260




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                                                                               15
                                 Indian Railways Institute of Mechanical and Electrical Engineering, Jamalpur, Distt. Munger, Bihar - 811 214
                                      August Review Estimate (ARE) for FY 2001-02 and Budget Estimate (BE) for FY 2002-03
                                                                  ABSTRACT FOR DEMAND NO. 2
                                                       SUMMARY STATEMENT (TOP SHEET)                                             (Figures in Thousands of Rupees)

                                                                                                                                      Cost
                                                                             Other             Transf                        Cost
                                                                                                                                       of
                                                                             Allow     Fees     er &              Contin      of               Contra
Detailed                                                                                                                             Materi              Other
                                                                             ances     and     Packin              gent     Materi              ctual
Head of     Salary    DA      PLB      HRA       OT       NDA       CCA                                   TA                          al _               Expen      Total
                                                                            includi   Honor       g               Expen       al               Payme
Demand                                                                                                                               Direct               ses
                                                                              ng       aria    Allow               ses      from                 nt
                                                                                                                                     Purcha
                                                                             TPA                ance                        Stores
                                                                                                                                       se
Primary
             01       02       03       04        11       12        05      07, 13     14       15        16     18 - 24     27       28        32        99
 Unit
  Actual
Expendit
            13731    5388     526       359      158       30       Nil       726       29       80       1966      568       Nil      64       1524     2713       27862
  ure for
 2000-01
 Budget
Allotmen
            16000    8500     525       400      105       35       Nil       675      100       25       2500      400      100       150      700      1000       31215
   t for
 2001-02
  Latest
Requirem
            15715    6757     600       360      160       30        01       730      500       27       2000      570       25      1000      4000     2000       34475
  ent for
 2001-02
 Budget
Estimate
            16000    7557     660       396      176       33       Nil       803      110       28       2200      627       28       355      1980     3080       34033
for 2002-
    03




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                                                                             16
    8.2 Classification of expenditure in Railways
    Recall the old saying once again - "In Railways you can do anything if you have availability of
    funds and sanction of competent authority."
    Unless you understand the structure of your budget, i.e. how the budget is classified in Railways,
    you will not be able to prepare a budget for yourself (i.e. your activities). If you do this properly,
    remember that half of your job of having the "availability of funds" is taken care of, then you only
    need the sanction of competent authority to do what you want (after being able to convince them
    of it, of course.)
    Consider the various items on which you would spend money - can you list some?
    Perhaps the first ones coming to your mind would be - Material (From Stock and from, so called,
    Local Purchase, i.e. non-stock).
    The next thing may be Staff salary, Dearness Allowance, Night Duty Allowance, Productivity
    Linked Bonus, Travelling Allowance, National Holiday Allowance, Transfer and Packing
    Allowance etc.
    Some of you, who may have dealt with such activities, may be able to recollect spending money
    for - debits/credits from other units (for material taken or given on assistance), contractual
    payments (this is heavily utilised by Civil Engineers, Electrical Engineers, and even S&T
    Engineers), etc.
    And, of course, there has to be one last - MISCELLANEOUS. Look at the table below, it gives all
    "PRIMARY UNITS" or "OBJECTS OF EXPENDITURE" ---
Primary Unit                   Stands for                  Primary Unit                     Stands for
     01          Salaries and wages                              18          Office expenses
     02          Dearness Allowance                              19          Rental for P&T phone etc.
     03          PLB                                             21          Advertising expenses
     04          HRA                                             22          Utilities – Water, Electricity etc.
     05          CCA                                             23          Rental for Office equipment
     09          Wages of casual labour                          24          Printing and stationery
     10          Kilometrage allowance                           27          Cost of materials – Direct purchase
     11          OT Allowance                                    28          Cost of materials – Direct purchase
     12          NDA                                             31          Fuel for other than traction
     13          Other Allowances                                32          Contractual payments
     14          Fees & Honoraria                                33          Transfer of debts/credits
     15          Transfer Allowance                              34          Adjustment of wages on POH
     16          Travelling expenses                             35          Adjustment of materials on POH
     17          Air travel in lieu of privilege pass            99          Other expenses


    To remember - PU 1 to 16 involves salary etc, 27 - Stock items, 28 - non-stock items, 32 -
    contractual payments, 33 - Debits/credits, 99 - Miscellaneous. Look at other PUs carefully, you
    can ask for funds in various PUs during Budget Estimate, and in the following Financial Year -
    indicating that the activity (say, Printing and stationery) was planned and has to be carried out (say
    printing of carry-handbook for diesel drivers), seek sanction of competent authority and get the
    work done.
    However, this alone would not classify all the expenditure Indian Railways incurs adequately. So,
    the expenditure is divided into different DEMANDS. They are called "Demand", because the
    proposed budget expenditure for a financial year (and expected earnings in that Financial Year),
    are placed in the Parliament during the Budget session in the form of Demand for Grant of money
    to spend for conducting the normal business of the Indian Railways, and after okayed by the
    Parliament, it actually becomes the budget for that Financial Year.
    The DEMANDS of Indian Railways are from Demand 01 to Demand 16 (remaining Demands -
    17, 18, 19 etc up to 79 belong to various other Ministries of Central Government, new Ministries


Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                17
    or Departments, when created are assigned to existing Demands for their grants or new Demands
    are created for them by the Finance ministry. The budget of all other Ministries combined is
    prepared by the Finance Minister and presented in the Parliament by Prime Minister, called the
    General Budget).
    Following is the purpose, which these Demands highlight/meet…
    (I)   Policy formulation.
         Demand 1. Railway Board.
         Demand 2. Miscellaneous Expenses (General).
    (II) General Superintendence and Services on Railways.
         Demand 3. General Superintendence and Services on Railways.
    (III) Repairs and Maintenance.
         Demand 4. Repairs and Maintenance of Permanent Ways and Works.
         Demand 5. Repairs and Maintenance of Motive Power.
         Demand 6. Repairs and Maintenance of Carriages and Wagons.
         Demand 7. Repairs and Maintenance of Plant and Equipment.
    (IV) Operation.
         Demand 8. Operating Expenses – Rolling Stock and Equipment.
         Demand 9. Operating Expenses – Traffic.
         Demand 10. Operating Expenses – Fuel.
    (V) Staff Welfare, Retirement Benefits and Miscellaneous.
         Demand 11. Staff Welfare and Amenities.
         Demand 12. Miscellaneous Working Expenses.
         Demand 13. Provident Fund, Pension and Other Retirement Benefits.
    (VI) Railway Funds and Payments to General Revenues.
         Demand 14. Appropriation to Funds.
         Demand 15. Dividend to General Revenue, Repayment of Loans taken from General
                      Revenues and Amortisation of over capitalisation.
    (VII) Capital Expenditure
         Demand 16. Assets - Acquisition, Construction and Replacement.
    Demands 01 to 15 are called Revenue Demands - because they reflect the expenditure to be
    incurred by Indian Railways every year to earn its revenue, as they reflect the routine business of
    the Indian Railways.
    Demand 16 is called the CAPITAL DEMAND, because it represents the requirements of funds by
    Indian Railways for asset building - i.e. laying new lines, constructing new bridges, acquiring new
    machinery, etc.
    Note carefully the various groups of Demands and what they represent. Also note the Demands
    divide the expenditure such that the entire Indian Railways expenditure is separately classified for
    easily determining the expenditure on any of these singly. However, this too, is not the complete
    classification yet. Each Demand is further divided into Minor, Sub and Detailed Heads.
    A Minor Head under any Demand is a three-digit number in hundreds (i.e. last two digit always
    being 0s, e.g. 100, 200, 300 etc). Each Minor Head, is further divided into Sub-Heads, which is
    also represented by a three-digit number in tens (i.e. the last digit is always 0, e.g. 110, 120, 130,
    210, 220, 230, 310 etc). Each of the Sub-Heads is further divided into Detailed Heads, which is
    also represented by a three-digit number (this number will never have a 0 at the end, e.g. 111, 112,
    113, 121, 122, 123, 131 etc). When we refer to a Minor Head, it indicates inclusion of all Sub-
    Heads (and, therefore, also all Detailed-Heads) under that Minor-Head.
    Along with a Demand, these digits make a combination, such as
        01-100, indicating Demand 01 and Minor-Head 100,
        02-110, indicating Demand 02 and Sub-Head 110,




Prepared by Madhukar Dayal, Professor (IT), email: mdprofmis@hotpop.com                                18
         05-311, indicating Demand 05 and Detailed-Head 311.


   Dd             Minor Head                        Sub Head                     Detailed Head
    03     100 General Management         110 Estt of the GM                111 Offices
                                                                            112 Office establishment
                                                                            113 Contingencies
                                          120 Estt of the DRM               121 – 123 As above


   Dd             Minor Head                        Sub Head                     Detailed Head
    04     100 Estt in Offices            110 Officers and office estt      111 …
                                                                            112 …
                                                                            113 …
                                          120 Supervisory staff and         121 …
                                          their office staff
    Some important Demands and their Minor Heads for Mechanical Engineers are given below…
  Dd                   Minor Head                                        Minor Head
   05     100 Establishment in offices             500 Electric Locomotives
          200 Steam Locomotives                    600 Rail Cars
          300 Diesel Locomotives                   900 Credits or Recoveries
  Dd                   Minor Head                                        Minor Head
   06     100 Establishment in offices             500 Elec Gen – Train Lighting, Fans, AC
          200 Carriages                            600 Misc repairs & Maint. Expenses
          300 Wagons
          400 EMU coaches                          900 Credits or Recoveries
  Dd                   Minor Head                                        Minor Head
   07     100 Establishment in offices             500 P&E – Signalling
          200 P&E – Way & Works                    600 P&E – Telecommunication
          300 P&E – Mechanical                     Etc.
          400 P&E - Electrical
  Dd                   Minor Head                                        Minor Head
   08     100 Steam Locomotives                    ………
          200 Diesel Locomotives                   800 Ferry services
          500 C&W                                  900 Credits or Recoveries
Demand 10 is also important for working out the total fuel expenditure (generally by DyCME (R&L) at
HQ in consultation with Traffic Branch directly).
Demand 16 is important for asset acquisition - important ones being M&P Programme (Plan Head
4100), Workshops and Production Units (Plan Head 4200), Rolling Stock Programme (Plan Head
2100) and others depending on local requirements (1700 for Computerisation, 3300 for S&T works
(Telephones, Intercom etc)).
The complete "Head of Allocation" thus consists of…
         For revenue expenditure - dd-hhh-pu (dd - Demand number, hhh - Minor, Sub and Detailed
         Head, and pu - Primary Unit). For ease in computerisation, padding zeroes have been added
         instead of the dash ( - ), so that the head of allocation may be entered as a number, and it takes
         the form dd0hhh0pu.




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        For capital expenditure - ABC 16-hhhh-pu (ABC - three character abbreviation for
        allocation, 16 - Demand number (this is often omitted, as the three character code amply
        clarifies that the Demand of expenditure is 16), hhhh - detailed head of allocation, pu -
        Primary Unit).
        Remember that if last digit in Detailed Head is 0, it indicates expenditure of all detailed heads
        taken together. Similarly, if Detailed-head and Sub-head digits are both 0, it indicates all Sub-
        Heads and all Detailed-Heads within that Minor-Head taken together. This is useful in
        preparing summarised expenditure statements. Your associate accounts office sends you a
        monthly statement of expenditure giving the expenditure in that financial year up to that
        month (usually for the month of April, this statement would be ready by end of May). This
        very important document is lost in the huge bulk of DAK received in Mechanical Department's
        offices every day!
        Earlier, these Demands were represented by letters of the English alphabet - Demand 3 by 'A'
        (called Abstract A), Demand 4 by 'B' (called Abstract B), and so on. Some Railways prefer to
        write this at the top of budget statements to this day.
        Let us look at an example of a diesel shed…
        The Demands under which it would spend money would be…
           Demand 05 - salaries, material etc. for maintenance of Diesel Locomotives (exploded in
            greater detail further ahead).
           Demand 07 - repairs and maintenance costs of machinery and plants (including 140 ton
            cranes - as these are treated as vital machinery and not as Rolling Stock). The salary,
            material etc used on these cranes should be charged to Demand 07, which at many places,
            gets charged to Demand 05, thus inflating the cost of Repairs and Maintenance of
            Locomotives unnecessarily (and to the advantage of justification for Electrification).
           Demand 08 - Operating expenses of a Diesel Shed include the Loco Foreman's office,
            salaries of his staff (shunters, pointsman, Diesel Shed control office staff etc) - as these
            are requirements of Railway operation and not maintenance of locomotives in the shed.
            The locomotives in the shed can be maintained without any of these staff - it is for
            sending the locomotives out for running trains and bringing them back from operation
            that this staff is functioning, so they are Operating staff. Uniform, material etc consumed
            by these staff (kerosene for lamps, batteries, shoes, coats, uniform, stationery, etc. amount
            to a huge sum). This figure also wrongly gets charged to Demand 05, causing a further
            undue increase in the overall cost of maintenance of Diesel Locomotives!
           Demand 10 - Fuel costs, these are normally determined by HQ (the order as well as
            periodic distribution is closely monitored by HQ). This covers the cost of Diesel for
            diesel locomotives (also Electricity for Electric Locomotives, and coal for steam
            locomotives (steam locomotives continue in some narrow gauge regions of IR, merely as
            a tourist attraction).
           Demand 12 - (Minor-Head 500 Cost of training of staff) applicable to those Diesel Sheds
            which have a Training School attached, this includes the amount paid to Apprentices as
            stipend, salaries of staff deployed in training etc. Asking for funds here, you can buy
            training equipment for your training school too.
        Under Demand 05, the various Minor Heads are as below…
                           dd-hhh    Description
                           05-100    Establishment in offices
                           05-200    Steam Locomotives
                           05-300    Diesel Locomotives
                           05-500    Electric Locomotives
                                     Rail cars, Ferry steamers and other maintenance
                           05-600
                                     expenses
                           05-900    Credits or Recoveries


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        Let us look at Head 05-300 in greater detail…


        DEMAND 05
        300 Diesel Locomotives     310 Running      repairs   in   Diesel Electrics…
                                   sheds
                                                                   311 Body, bogie and brake rigging
                                                                   312 Traction motors and other
                                                                   electrical rotating machines
                                                                   313 Engine
                                                                   314 Compressors and exhausters
                                                                   Diesel Hydraulics…
                                                                   315 as in 311.
                                                                   316 Transmission equipment
                                                                   317 as in 313
                                                                   318 as in 314
                                   320 Running repairs done in     321 to 328 as in 311 to 318
                                   workshops for sheds
                                   330 Periodic overhauls          331 to 338 as in 311 to 318.
                                   340 Intermediate overhauls      341 to 348 as in 311 to 318.
                                   350 Special repairs             351 to 358 as in 311 to 318.
                                   360 Other repairs               361 Control, cables and other
                                                                   running repairs - Diesel Electrics.
                                                                   362 Control and cables and other
                                                                   running repairs done in workshop
                                                                   for sheds - Diesel Electrics.
                                                                   363 Control and cables and other
                                                                   repairs - Periodic overhaul - Diesel
                                                                   Electrics
                                                                   364 Control and cables and other
                                                                   repairs for intermediate overhaul -
                                                                   Diesel Electrics
                                                                   365-368 Same as in 361 to 364 for
                                                                   Diesel Hydraulics
                                   370 Miscellaneous charges       371 to 374 Diesel Electrics - Same
                                   including adjustments           as for 272 to 275.
                                                                   375 to 378 Diesel Hydraulics -
                                                                   Same as for 272 to 275.
        * 272 to 275 (for Steam Locomotives) read as below…
                 272 Trials and experiments.
                 273 Special adjustments.
                 274 Overcharges and undercharges - On cost.
                 275 Overcharges and undercharges - Manufacture and repairs.




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        On adding the Primary Unit ("Object of Expenditure") to the dd-hhh given in above table, the
        "Head of Allocation" for a particular expenditure becomes complete. Thus, the Officers
        salaries would be charged to 05-111-01, their Dearness Allowance to 05-111-02 and so on.
        At the time of preparing a budget for next Financial Year, you must take care that you ask for
        adequate funds under each Detailed-Head separately (which is very difficult to predict) or
        under each Minor-Head after giving it a careful consideration.
        You may like to prepare a zero-base-budget (ZBB), if not for all your Demands, then at least
        for those where you incur huge expenditure. If you cast a look at any previous year's
        expenditure, you can determine in which demands (and further, in which Minor, Sub or
        Detailed heads your expenditure is high) and select only a few of them (at a time) to be
        reviewed on ZBB principles.
        8.3 Preparing your budget (on zero base budgeting (ZBB) principle)
        ZBB means, not looking back at the previous year's expenditure and up-scaling it by inflation
        index to determine the next year's budget (one who sees behind and moves ahead will
        definitely fall - you should pause, look behind, note the errors committed, correct them and
        then look ahead and move forward). This look-behind-walk-ahead is the most common folly
        practised in Mechanical Department of IR - not only where budget is concerned, but even in
        day-to-day technical work. Remember that in copying the past, we copy its mistakes too!
        ZBB means to determine in totality the activities to be carried out by your organisation in the
        next Financial year, say…
            (1) Maintenance of, say 100 locomotives, requiring…
                 (a) PU 1 to 16 - Payment of salaries to Officers and staff - this can be planned by
                     taking the pay-scales, with number of sanctioned posts in each pay-scale and
                     average basic pay in each scale, multiplying and totalling the figure to arrive at
                     budgetary requirement in PU 01. Dearness allowance can be determined as a
                     percentage of this, with provision kept for enhancement in DA twice in a year
                     giving the figure for PU 02. Transfer allowance can be estimated with number of
                     likely retirements in next year to be replaced by people from other units. Office
                     Superintendent of the Personnel Department should prepare this figure (but you
                     will rarely find an OS of Personnel Department who has enough idea about
                     preparing a budget in Mechanical offices).
                 (b) PU 27 (Cost of material from stock) - (VERY IMPORTANT) This exercise
                     would require the help of computers, as the number of stock items would be
                     large. To determine the correct requirement of each stock item required for 100
                     locomotives during the year (giving consideration to pre-mature failures based
                     on experience, and subtracting for locos expected to be overhauled by
                     workshops (where the material will be provided by workshops, and they will
                     raise debits on you, which you will accept under 05-330, some Railways allot the
                     entire grant under 05-330 to workshop nominated for POH of diesel locomotives
                     so that sheds do not have to worry about its debits). Stores section should
                     prepare this figure.
                 (c) PU 28 (Cost of material from direct purchase) - (MOST IMPORTANT) as it
                     covers your need for non-stock items, wherein are included 100s of items which
                     may be unplanned. However, if you take a list of all items indented in, say, last
                     five years, it would cover any material, which may be required by the shed.
                     Assess the quantity of all such material by getting the expected consumption
                     from in-charges of all sections of the diesel shed, total the quantity and multiply
                     by the going rate of the item to arrive at the figure of required budget. Add a
                     suitable margin for out-of-course indents necessary to be placed. Stores section
                     should prepare this figure too.
                 (d) PU 32 (Contractual Payments) - (VERY IMPORTANT) This provision is for
                     meeting the payments for activities carried out by outside parties for the diesel
                     shed on contract - such as reclamation of cam-shafts, gear cases, traction motor
                     end-shields (both ends), shed-cleaning contract, material transportation contract
                     and any other work you may think fit for carrying out on contract etc. You may


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                       keep allocation here for Departmental or Inter-departmental work orders too (for
                       example, placing a work order on Electrical Department to install additional
                       lighting in pit or any other civil/S&T type of work). Departmental work orders
                       above Rs 50,000/- have to be vetted by Associate Accounts. Sometimes you may
                       like to order material made according to your drawing from workshops (such as
                       instruction boards, cleaning tanks etc).
                 (e) In Demand 07 - it will cater to Annual Maintenance Contracts of various
                     machines (Dynamic Balancing machine, computers, vehicles, material handling
                     equipment, EOT cranes, any other machine/plant you may like to include on
                     AMC).
                 (f)    PU 33 (Debits and credits) - This PU must contain sufficient funds for accepting
                       material from DLW (import indent and bulk indent items) and received from
                       other sheds/workshops on assistance. You must make sure you raise debit on
                       other units to whom you provide material on assistance, through debit vouchers,
                       have them accepted by them and realised in your budget.
                 (g) PU 99 (Miscellaneous) - is to cover any contingency expenditure, which was not
                     planned and budgeted for. Sometimes, when the funds available under a
                     particular PU fall short during the year, they can be realised from this PU, but
                     now before convincing accounts of its urgent need.
        In preparing your budget on ZBB principles, you must look back at your previous year's
        budget too ensure that you have not missed out anything (if the variation in your figure and
        previous year's budgetary figure is too high (on +ve or -ve side) you may consider going
        through all the vouchers of expenditure in previous year to ensure you have covered all
        activities (for example tyre-turning charges for locos for sheds not having wheel-turning
        machines, is also a huge expenditure - which should be planned in Demand 08, as it is an
        operating need not a need for maintaining the locomotive.
        A word on expenditure in Demand 05 and 08 is necessary here. While Demand 05 is to cater
        to (and purely to) the funds needed for maintaining the locomotive, the funds (for staff salaries
        etc, materials from stock or non-stock, and anything related to it) required for running the
        locomotive should be planned and also booked under Demand 08 - such as,
                      Requisitions for brake-blocks (as they are consumed during running/operation of
                       the loco and not in its maintenance), lubricating oils (by same logic), all greases
                       and oils (by same logic).
                      Non-stock indents for similar items etc.
        It is worth pondering that why should the (huge) amounts/funds required for lubricating oil
        filters, all other filters in the locos, entire braking system including compressors/exhausters,
        dynamic braking system, etc not be charged to Demand 08 - as they are all (loco) operating
        needs.
    Tips…
       Plan, calculate and ask for adequate funds at the BE stage itself to avoid shortage of funds
        during the year. You will seldom be disappointed.
       Make sure every expenditure is being booked correctly. Items chargeable to other demands, if
        drawn against your demands will deplete your availability of funds, e.g., oils, lubricants,
        brake blocks should be charged to Dd 08 being operating expenses. (Your Loco Foreman‟s
        staff also is paid from Dd 08).
       During the year, only re-appropriation can be done by HQ, if funds are surplus in another
        Minor-Sub-Detailed-head (but within the same demand).
       Pay special attention to PU – 27, 28, 32 (32 is utilised extensively by Civil, Elec, S&T but
        least by Mech. Greatest financial powers are contained here.), 33 and 99.
       Pay even attention to – 18, 19, 21, 23, 24 (if you intend to use them for a good measure).
       Maintain your own liability registers. It is mandatory for every budget controlling officer -
        and only then you can authentically certify funds availability.
       The same register can help you assess your need for funds during AR, RE, Ist M and Final M.



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    Understanding of budget and purchase processes will give you clear understanding of
     requirements for concurrence/vetting of your proposals by associate accounts. (Vetting is the
     process of reserving funds from allotted funds/grants after examining a proposal for a
     particular work/item and assuring that it had been planned and funds for it had been asked
     already (in BE); Concurrence is the process of examining a proposal for grant of funds after
     establishing its usefulness/rate of return on investment in it).
Endnote
Possessing the following additional information/knowledge will be helpful to you in your working…
        Powers for carrying out repairs to machines, plant and equipment.
        Handling of Works contracts/Tenders.
        Workshop Manufacturing Suspense Account for workshops.
        Costing systems in Railway Workshops.
        HRM – Staff selection (for various categories), trade-tests, promotions, D&AR, awards, CRs,
         Welfare Organisation Structure and Functions, Labour Laws, Industrial Act, Trade Unions in
         Railways etc.
(There’s no end to Knowledge.)




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