Financial and Cost control in Railway Workshops /Sheds/Units

Financial and Cost control in Railway Workshops is one of the most important areas of functioning of Railways as a major part of expenditure is incurred in this area.  Knowledge of financial and cost control measures and systems envisaged in various codes is essential for every staff so that scarce financial resources made available to workshops are put to optimum use resulting in greater efficiency, higher productivity and profitability to the organization.

FINANCIAL CONTROL IN RAILWAY WORKSHOPS

Following are the steps envisaged to exercise Financial Control in Railway Workshops.

1. Preparation and sanction of Estimates.
2. Standards of Financial Propriety.
3. Preparation of Rolling Stock Program.
4. Monitoring of expenditure incurred in workshops on various works.
5. Control over expenditure through budgetary reviews.
6. Vetting of Annual Estimates and Review of AACs of Stock items.

The above steps are explained in brief as under:

1. Estimates:  One of the ways of exercising financial control in Railway workshops is preparation of estimates and obtaining sanction thereto.  This ensures strict financial control wherein the necessity, utility and financial prospects of proposals for spending money are examined before sanction to expenditure is obtained.  Propriety of Expenditure, Budget availability, Competency to sanction, Incidence and Classification of expenditure are some of the important checks in this area. Ordinarily, no expenditure can be incurred baring a few exceptions, unless competent authority sanctions a detailed estimate and necessary funds are allotted. It should be ensured that expenditure is not incurred over and above the sanctioned cost as a matter of routine and steps to be taken to revise the estimate as soon as it is known that there is likely to be sill over in costs.
2. Standards of Financial Propriety:  Observance of Standards of financial propriety broadly include that level of expenditure is what occasion demands, properly and legitimately so chargeable to Railways and allowances such TA, honorarium etc., do not become source of income to recipients.  These are universally accepted principles to be observed by every authority empowered to sanction expenditure from government finances. Every authority should exercise the same care and prudence expected from a common man who exercises care while spending his own money.
3. Preparation of Rolling Stock Programme:  This is an exercise through which proposals for additions, renewals and replacements of rolling stock are proposed for inclusion in RSP every year.  Financial justification to the proposals is essence of this exercise duly keeping in view the necessity and utility of the proposals.
4. Monitoring of expenditure incurred in workshops on various works:  The expenditure incurred on various works in workshops is to be monitored on both completed works and works in progress. Necessary action to realize the money from the agencies that proposed the works should be initiated as soon as the works are completed.  It should be ensured that no money is left unrealized in books of accounts, which is legitimately payable to railways.

 

• Control over expenditure through Budgetary Reviews.

 

The expenditure in Railway workshops is best regulated through various budgetary reviews viz., August Review, Revised/Budget Estimates and final Modification.  There is also a machinery of Monthly Financial Review through which trends of expenditure can be reported regularly to initiate steps to control the spending within the limits of Budget.

 

• Vetting of Annual Estimates and AACs of Stock Items:

 

This is another important area of spending on railways, which needs close monitoring. Based on Annual Estimates and approved AACs budget is asked for both under revenue demands and under stores suspense. A critical review of ANEs is essential based on actual consumption of materials that prevents unnecessary locking up of capital and accumulation of stores balances leading to higher inventory turnover ratio.

COST CONTROL IN RAILWAY WORKSHOPS

As workshops are major spending units in Rlys, it is necessary to cost each activity as close to reality as possible and institute proper mechanism to regulate and control the costs. Specific areas requiring cost control are explained as under:

1. Controlling Idle Time:  Idle time is to be controlled by analyzing the same under two headings viz avoidable idle time and unavoidable idle time. Avoidable idle time is controllable. Examples are idle time due to lack of instructions and lack of tools, which are as a result of poor planning. Unavoidable idle time may be due to human reasons like attending nature needs, time taken to switch over from one job to another, breakdown of machines etc. Percentage on account of these factors can be reduced to some extent by taking preventive steps.
2. Controlling Overtime:  Overtime payment is another area where close monitoring is required. Insisting approvals at higher levels may reduce such cases. Unless there is scope to increase turnover based on urgent and unplanned demand of inescapable nature, resorting to OTA needs to be minimized if not avoided.
3. Controlling wastages, spoilages and defectives: This is an important area of material management where substantial cost savings can be affected. Normal and abnormal levels/percentages of wastages, spoilages and defectives should be fixed. Reasons for abnormal amount of wastages are to be analysed and responsibility should be fixed for poor workmanship, improper methods of production and necessary corrective steps taken.
4. Controlling overhead charges:  Overhead charges constitute a major segment of cost in workshops. While certain elements of overheads are necessary to be incurred. Care can be taken to reduce the level of certain overheads like power consumption; reduction of losses due to idle time etc., constant monitoring of overheads and comparing the same with other comparable units may throw light on areas requiring control.

Other areas where cost control yields substantial results are as under:

1. Control of labour costs.
2. Utilization of resources.
3. Review of stores balances with a view to reducing inventory.
4. Reduction of overtime and night duty allowance.
5. Reduction of compensation to workers by improving safety.
6. Conducting proper time study and job study to fix realistic time allowances to carry out different jobs.
7. Evolving proper costing systems like standard costing and cost control Mechanisms.
8. Compilation of standard costs, comparing the same with actual with a view to analyze variances and control the same.
9. Continuous efforts should be made to reduce the unit cost of production in shops.
10. Identification of idle resources, elimination of redundancies and excess capacities leading to better utilization of assets.

                The steps envisaged above will help exercising cost control in railway workshops, which lead to higher productivity and profitability. In the light of availability of very limited resources with the railways, it is expected that every functionary of railways to be cost conscious and exercise control over the same.  It should also be borne in mind that resources utilized for buying rolling stock are raised through market borrowings at a very high cost. Lease charges are forming significant part of working expenses. Hence, the relevance to exercise cost control in Railway workshops needs no special emphasis.

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