Cannons/Standards of Financial Propriety

Cannons/Standards of Financial Propriety 

In exercise of their financial powers, the sanctioning authority must pay due attention to the following principles –

i) The expenditure should not prima facie be more than the occasion demands and that every Government should exercise the same vigilance in respect of expenditures incurred from public money as a person of ordinary prudence, would exercise in respect of expenditure of his own money.
ii) No authority should exercise its powers of sanctioning expenditure to pass an order, which will be directly or indirectly to its own advantage.
iii) Public money should not be utilized for the benefit of a particular person or section of a community unless –
a) The amount of expenditure involved is insignificant.
b) A claim for the amount could be enforced in a court of law.
c) The expenditure is in pursuance of recognized policy or custom.

iv) The amount of allowances such as travelling allowance granted to meet expenditure of a particular type should be so regulated that the allowance are not on a whole a source of profit to the recipient.



Despite of best efforts by the Station staff, the items/amount which could not be realized/ collected by the staff at the close of the month for which the Balance Sheet indicate closing items are otherwise known as Station outstanding.

The Station Master is personally held responsible for keeping a proper account of such items as also timely clearance. The following items will generally constitute Station outstanding.

1) Floating cash - Since this sum has been provided by the Adm. to enable the Stn for daily transactions no action is generally called for from Station Master to clear this item until either the money is withdrawn or the Stn is closed for traffic.

2) Debit Received from cashier- Debits are received from cash office on Account of torn/soiled notes, counter foil notes, coins are also short remittances by Station. As soon as receipt of debit advice the Station Master has to identify the responsible person and action needs to be taken to make good the amount within 3 days.

3) Admitted Error Sheet (Debit)- The Admitted Error Sheet are the error sheet through which the financial loss sustained by the Railway on account of irregularities/mistakes from Station staff, pointed out by Accounts office, which has been accepted by the Stn from time to time. The amount admitted by the Stn will have to be cleared either in lump sum or in installment by the responsible official. Action taken in this direction by the Stn will have to be recorded in the error sheet register maintained by the Stn besides advising concerned office for recovery in case of installment payable through salary.

4) Not admitted error sheet -These are cleared in two ways -

(i) Either by obtaining credit Advice from Account Office by withdrawing the debits intimated through error sheet .
(ii) Subsequent admission of the not Admitted error sheet by the Station by realizing the mistakes pointed out by the Account office later.

In case of remarks offered by the Station are acceptable to the account office then, it will withdraw the debit by issuing credit advice which will nullify the debit or debit will be accepted by the station and necessary action will be taken to remit the amount by the responsible official as stated above.

5) To-pay Invoice (Consignment received)
Advice to consignor and consignee regarding arrival of the consignment will be issued, advising the party to take delivery within a specified period. In case the party request for diversion of the articles the administration has to act upon this immediately and clear the item. If on the other hand party does not turndown within the specified time, Station Master has to take speedy action by way of either to divert the consignment to Lost Property Office or action for auction and clear the item without any further delay.

6) To-Pay Invoice (consignment not received) -
In order to clear such items the Station Master has to initiate action by confirmation from forwarding station the particulars of Booking as also enquiry and personal contacts. Similarly via station also needs to be contacted for the movements of the consignment. Necessary certified over charge sheets are prepared, get this certified by forwarding station in case it is confirmed the consignment has not been booked to that station or consignment has been withdrawn after preparation of PWB/ Invoice . In the both cases SM is responsible for timely action and speedy clearance of such items particularly the irregular items i.e. more than one month old.

7) Unsold timetable,  indemnity bonds, publications: -Due to revision in timings of trains, the timetables which has been supplied to Stations for sale become surplus on account of non sale which contributes an outstanding to Station & thereby in the balance sheet month after month. The unsold timetables are therefore to be returned to Divisional Commercial Manager duly preparing statement of same indicating the total value of the unsold timetables, with a request to advice necessary credit for the same. Similarly the indemnity bonds & other publications which fetches value on it's disposal also required to be returned to the department, if they are time barred and necessary credit obtained from dept to wipe off the corresponding outstanding debit from the Station Balance sheet.
8) Miscellaneous Items:- This comprises rent, water charges, electric charges,crane charges, license fee etc to which the Station Master is responsible for realization as & when it become due. In the case of non realization due to certain reasons beyond the capacity of Station Master, reasons for the non-recovery should be conveyed to higher authorities for taking necessary & timely action appropriate so that outstanding items could be realized and there by the debit could be cleared

Amount accounted for in a particular month but could not be realized / cleared up to the end of the month is termed as station outstanding and as the non realization/clearance pertains to earnings which originate at station the outstanding is called as station outstanding. In short the station outstanding means unrealized earnings or un cleared liabilities. All amount received by the Station Master are shown on debit side of the station balance sheet and amount sent to chief cashier is shown on credit side of station Balance Sheet. Hence the difference of debit side and credit side of station Balance Sheet may also be termed as station outstanding.


1) Floating Cash :- All stations which are opened for traffic are provided with some amount in shape of small coins . This amount is known as floating cash . This amount is supplied to the station with the object that the passenger if comes to purchase a ticket and if they do not have sufficient change, to enable the banking clerk to refund the balance amount in the shape of small coins .

This amount should always remain at station forever and as it is. No addition/deletion is permitted from this amount.

2) Cashier's Debit :- This debit is raised by chief cashier for the amount short received or the defaced coins or spoiled or torn notes received along with station remittance through cash remittance note. The cashier debit is to be cleared immediately with in three days by remitting the shortages or replacing the notes and coins because there debit are always accepted debits.

3) Admitted Debit or Admitted error Sheet :- Error Sheet is documents issued by the Account's Office . It is the result of the internal check conducted by Account's Office on the written/documents submitted by the station. Any short Account , Short collection notice by the Account Office is advised to the station through this document . The Error sheet after scrutiny may be admitted or disputed. Admitted error sheet can be cleared as under: -

a) Clearance by payment in cash.

b) Recovery through paysheet.

c) Write off ---under competent authorities sanction.

4) Not Admitted Debits :- If the undercharges shown by the accounts office in error sheet is not acceptable to the station staff, the Station staff should write on the back side of the error sheet 'Not Admitted. This (not admitted)error sheet must show clear remark on the back side for disputing the debit raised. Non admitted error sheets are cleared as under.

a) Credit advice issued to accounts office to withdraw the debit on paying the convinced by the reason put forth by the special station staff.

b) Credit advice note/credit authority letter being issued by the Travelling Inspector Of Accounts on verification of the concerned document and having convinced of wrong/irregular debit.

c) When not admitted debits are returned back by accounts debit for not accepting the reason put forth by the station staff such error sheets are cleared according to the admitted debit or admitted error sheets.

d) Undercharges in inward paid parcel traffic :- Areas of undercharges means the undercharges pertaining to the way of bills or invoices of previous month or and parcel or goods not delivered in end of the current month. All such undercharges should be shown as accounts and whenever the parcels or goods are delivered
amount should be forwarded to chief cashier and accounts should be cleared.

5) Freight Outstanding on inward to pay consignment for which consignments on hand - Such outstanding will be cleared on collection of freight at time of delivery or a notice will be issued to the party concerned and in response to the notice if the application are received for rebooking, the station master in such case will issue a fresh way bill or invoice for the rebooking of the consignment to new station. All charges due at the rebooking station in addition to the fresh freight are shown in this fresh way bill or invoice . The outstanding due on account of paid or to pay charges at the rebooking station will be cleared by accounting them under special credit in the concerned Balance Sheet. If no responses is received from party, the outstanding may be cleared by auction sale or transferring the to the lost property office, only after obtaining the approval of the competent authority.

6) Inward to pay freight for which consignment not on hand :-  Wagon load consignment may get delivered with the approval of DCM to some other destination. In such cases the freight changes if any outstanding and the old destination station will be cleared by the exchange of document called certified overcharge sheet. The overcharge sheet will be prepared and certified by booking station and sent to the station when the debit outstanding and required to be cleared. The amount shown in the overcharged sheet will be taken under special 'Credit' to clear the outstanding.

7) Govt. Publication for sale and indemnity bonds:- The unsold Govt. publication will be cleared when they are sold out by taking cash credit . If more stock is received than the requirement of the station such stock of sellable publication should be transferred to printing press or Divisional Commercial Manager’s office to clear the outstanding.

8) OTHER MISC. ITEMS :- Generally, Wharfage & demurrage worked on for which authority issued by the competent authority if not forwarded to traffic accounts office. Traffic account office will object such 'credit' entries ; in such cases wharfage , demurrage for gone authority for the competent authority should be
obtained and a copy should be sent to traffic account office to clear the outstanding.



Station Balance Sheet is a statement of Account prepared by Station Master in the duly prescribed proforma and under prescribed Heads of Accounts showing the liabilities accrued at Stn. on account of sale of Transport services. The Stn. B/Sheet will have two sides. Left hand side is known as debit side where as Right Hand Side is known as credit side. All such items will be shown on the debit side for which SM is responsible to recover the charges for rendering of different types of services. In short, debit side will show the liability of Station Master for recovery of charges. Credit side will show the mode of clearance liability either by means of cash, cash vouchers or any other authorised voucher. The debit side and credit side of Balance Sheet should be equal in amount. But in practice generally total of debit side will be more than the
credit side because every time it is not possible to recover the freight charges accrued during the month in the same months account and there is difference between debit side and credit side. To equal the amount of debit and credit side the difference between debit side and credit side is shown as "Closing Balance " on credit side of the Balance Sheet . This closing balance in the other words is known as Station Outstanding comprising of different items. Whatever the figures shown in the Balance Sheet are summarized figures extracted from different books and it is the responsibility of the Station Master to prove the figures by enclosing certain returns. Information regarding Local and foreign traffic will be given in the same Balance Sheet although returns for Local and foreign traffic will be prepared separately. Separate Balance Sheets are to be prepared for coaching and goods traffic.



Station Returns (Coaching Traffic)

Following are the returns required to be submitted by the stations to the AccountsOffice. They are categorized as per the periodicity of their submission.


1. Cash remittance note.
2. Daily return of non-issued tickets
3. Daily return of collected tickets.

Periodical :-

1. Advance statement of coaching earnings.
2. Ticket Indent.

Monthly :-

1. Monthly Statement of non-issued tickets.
2. Passenger Classification.
3. Parcel Cash Book.
4. Excess fare return.
5. Wharfage and Demurrage return.
6. Statement of Error sheet received.
7. Statement for supply of Government publication.
8. Deduction List
9. Remission orders statement.
10. Statement of Credit advice note received.
11. Statement of certified overcharge sheet received.
12. Statement of Debit transferred to other stations.
13. Statement of Debits transferred by other stations.
14. Statement of sundry and miscellaneous Earnings.
15. Statement of Station outstanding (Separate for each item.)
16. Coaching Balance Sheet.


Checks on station Balance Sheet.

The debit side may be divided into 3 parts opening balance, current debits and special debits ( accountal of Error Sheet).

Opening balance is checked with the closing balance which is shown in the previous months Balance sheet. Current debits are checked with reference to various returns such as passenger classification copy of outward paid cash book, inward to-pay parcel abstracts and summaries, Warf. & Dem. statements and wagon registration fees statement. In addition to this, accountal of Goods traffic for current month will be checked with converted abstracts. The amount of E/sheet accounted for in the 3rd part will be checked with reference to entries of E/sheet recorded in the E/sheet register by the T/Accounts office.

The credit side of the station B/sheet is also divided into 3 parts (1)Cash and cash voucher duly acknowledged by chief cashier (2)Special Credit (3)Closing balance. Cash and cash vouchers as acknowledged by the chief cashier are checked with the cash remittance foil received from the cashier .The amount of cash remittance Note is posted in the register and checked with date-wise posting of cash remittance Note in the station B/sheet.

Special credits are checked with the enclosed documents such as refund list, paid on to-pay statement certified over charges deduction list credit advice Notes etc. received in T-Accounts office along with the station B/sheet.

Closing balance must be supported by the statements showing full particulars of theamounts yet to be cleared by the Station Master. The totals of the debit and credit side of the Stn. B/sheet should be checked to see that they are correct and both the sides totals are equal in amount. If the amount of the returns received in the Traffic Accounts is in excess of the amount shown in the station Balance Sheet, the amount of the Station Balance Sheet is corrected and difference of amount is debited against station. If the amount shown in the Balance Sheet is in excess of amount of return received , it is taken into consideration that a part of the return is missing and such differences are entered in the register of missing returns and the same are
called for from the station.

If the amount of credit taken in the station Balance Sheet exceeds the amount of Special credit taken under the supporting documents enclosed to the station Balance Sheet , the difference is debited against the station and closing balance in subject balance sheet is increased to the tune of difference.

The result of check of the Station Balance Sheet in the traffic Accounts office is intimated to the station through advice of Internal Check, showing closing balance as per Stn. Balance Sheet and the closing Balance Sheet as worked out by the Traffic Accounts office during the course of internal check. The difference between the two will be explained in detail in respective column of the advice of internal check.



Investment Planning and Works Programme Section


Investment decisions relating to the creation, acquisition and replacement of assets on the Railways are processed through the annual “Works, Machinery and Rolling Stock Programme”. Instructions regarding the preparation of the Machinery and Rolling Stock Programme are contained in Chapter XV of the Indian Railway Code of Mechanical Department (Workshops). On the basis of the estimate of the Plan funds requirement for the ensuing year, the Railway Board lay down the financial limits (see para 609) under various plan heads (refer to Appendix I) within which the Railway Administrations are required to make out
their programme for the following years duly vetted by the Financial Advisor and Chief Accounts Officer for submission to the Railway Board by a specified date. The programmes are examined by the Railway Board and discussed. where necessary, with the General Managers and the works to be undertaken as well
as the outlays during the Budget year are decided upon.The various stages of investment planning and preparation of the Final Works Programme arc given below:-

(i) Formulation of schemes as a part of advance planning;
(ii) Submission of major schemes for advance scrutiny and clearance by the Railway Board for selection of Projects to be taken up in the following year;
(iii) Preparation of the Preliminary Works Programme within the financial ceiling laid down by the Railway Board; and
(iv) Discussions with the Railway Board and submission of the Final Works Programme.

The investment planning process through the above stages is dealt with in the following paragraphs.

Advance Planning

The preparation of the annual Works Programme of a Railway is not an isolated exercise for the year, but is part of a continuous planning process from the level of the Divisional Officer upwards. Investment proposals emanating from the Division would be those which are intended to effect improvement in operation
or remove bottlenecks etc., within the Division itself. Major investment proposals which benefit a Zonal Railway System or the Indian Railway as whole should be co-ordinated and planned at the level of the Railway Headquarters or the Railway Board, where necessary.An important requirement for effective
investment planning is the realistic estimation of project costs. Full details of the scheme must be worked out and no scheme should be included in the Railway’s Works Programme unless detailed plans and estimates have been prepared and are ready. Detailed Traffic and Engineering surveys should be carried out for new lines, gauge conversions doublings and for other line capacity works costing more than Rupees Five Crores each. In the case of yard remodelling, line capacity works i.e., goods shed facilities and important buildings the estimates should be based on plans approved and signed by the concerned departments who should scrutinise the plans carefully to avoid the need for making any substantial modifications in the required facility it a subsequent stage. If major changes in the plans/scheme/specification of works nevertheless become necessary and arc likely to lead to substantial excesses over the sanctioned estimate the changes asked for by the concerned departments should not be agreed to unless reviewed and approved by the competent
authority sanctioning the original estimate. In regard to proposals for new marshalling yards goods terminals and tranship yards etc.. work study teams should go into the actual working before formulating schemes for the additional facilities required.

It is an essential feature of the railway system as a commercial undertaking that expenditure other than that wholly chargeable to ordinary Revenue, incurred on new assets or for improvement of existing assets should be financially justified
before it is incurred. Detailed instructions regarding the financial Appraisal of Railway projects are contained in Chapter II of the Indian Railway Financial Code to which reference may be made. The cases where no financial justification need be given are contained in pale 202 of the Indian Railway Financial Code. Detailed financial implications (including financial return) should be worked out in all cases including works financed from Development Fund, Accident Compensation. Safety anti Passenger Amenities Fund or Open Line
Works Revenue . If the prescribed return is found to be not obtainable on the anticipated level of traffic, the Railway Administration should examine whether the proposal cannot he reduced in scope, or given up in favour of some other alternative. or postponed until traffic prospects improve.

When a number of works have to be carried out to achieve a common objective, the financial implications or justification should be worked out for the entire scheme as a whole. In case where the wider schemes covers two railway a joint estimate of cost should be prepared for the Railway Board’s consideration, The Railway in which the major portion of the work falls should obtain figures from the contiguous Railway for submitting joint figures of cost anti financial implication to the Railway Board.

Scrutiny of Schemes before preparation of Preliminary Works Programme

All schemes costing Rs. 20 lakhs or above should be worked out comprehensively and sent to the Board alone with full details of (i) the technical features. (ii) Cost break-up, (iii) benefit expected to accrue and (iv)
financial implications. A sketch map of each proposal should also be sent. The Railway Administration must clearly bring out the purpose of each scheme and confirm that the proposal meets the objective fully and that the scope and cost of the project have been arrived at after the fullest possible investigation including assessment of the financial implications. After the schemes have been scrutinized by the Board, the Railway Administrations should be advised of the acceptance, with or without any modifications for inclusion in the Works Programme.

Track renewal proposals costing Rs. 20 lakhs and above are initially scrutinised by the Board, keeping in view the availability of permanent way materials. progress of the works already sanctioned and other technical factors. For this purpose the Railway Administrations should send all track renewal proposals costing Rs. 10 lakhs and above together with technical data like traffic density, age, conditions of track components etc., in the form prescribed by the Board to reach the Boards office by the stipulate date. After the proposals are screened by the Board, guidelines are issued to the Railway Administrations to reframe their proposals for inclusion in the Works Programme.

Preparation of the Preliminary Works Programme

The Chief Engineer of the Railway will be primarily responsible for ensuring that the proposals prepared by the various departments are complete in all respects and are correctly prepared. The overall priorities
within the ceilings given by the Board will also be fixed by him in consultation with the General Manager and other Heads of Departments. He will be responsible for the preparation and timely submission of the Preliminary and the Final Works Programme.

In or about June/July each year the Railway Board should convey to each Railway, in respect of each Plan Head, the total outlay within which the Works Programme should be framed by the Railway. A list of the Plan Heads is given in Annexure I. On receipt of this financial ceiling the Railway Administration should take stock of the schemes already formulated and those under consideration and select for inclusion in the Works Programme within the financial ceiling such works as are expected to yield the maximum benefit to the Railway. preference being given to works in progress. Further necessary changes in the investment schedule may be made in order to work within the financial ceiling for the year such modification., being taken note of in framing the Preliminary Works Programme and revising the financial implications. if necessary.

The Preliminary Works Programme for the following year should be submitted by the Railways to the Railway Board by 1st week of September or such earlier date as may be laid down by the Board. Proper financial appraisal of each work should be given in the Preliminary Works Programme together with the comments of the Financial Adviser and Chief Accounts Officer.

The project cost should be based on firm data both as to quantity and rates at current price levels. and should any increase occur in prices during the period intervening between the initial preparation of the project estimate and its inclusion in the Works Programme. the estimate should be updated taking into account any significant changes in the wages and material prices as well as increase in freights and fares. No other increase such as on account of change in scope of the project should be allowed without prior reasons being
adduced for acceptance by the Railway Board. A sketch showing the proposal should accompany each proposal.

Each investment proposal should be accompanied by a detailed plan showing the scheduling of the project to match the traffic requirements and the financial outlay proposed for the year should be in accordance with this project schedule to enable the Railway Board to arrange for a realistic funds allocation for implementation of the programme.

In deciding the outlays for the various works Railway Administration must endeavour to progress all works in progress speedily and bring them into use at the earliest possible date. A work which has been sanctioned and for which funds have been allotted whether in the original or supplementary budget of a year should be treated as a “work in progress” for the next year and provided for as such in the programme. Such works should be grouped .

The Railway Administrations should make a realistic assessment of the amount required for each work in progress and necessary provision should be made for it in the Works Programme. In estimating the provision for works during the budget year a generous allowance should be made for those delays in execution which though unforeseen are known from experience to be so liable to arise particularly prior to inception anti during the initial stages of large projects. The provision made should take into account adjustment of charges on surveys connected with a project.

In exhibiting the outlay for the current year against individual works in the works programme, the outlay should be as per Pink Book, and in exceptional cases where the Railways propose any substantial increase in the outlay with corresponding reductions against other works, such revised outlay may be shown separately in brackets below the outlay as furnished in the Pink Book duly explaining the reasons for doing so in footnotes at the appropriate places. As far as possible only the last sanctioned costs should be exhibited. Wherever it is visualised that the cost would involve an excess over the last sanctioned cost, effective steps should be taken well in time to have the revised estimate prepared and sanctioned by the competent authority before the Works Programme is sent to the Board. In case where the revised estimates are sanctioned subsequent to the despatch of the filial Works Programme but before the end of January of the following years the same should be promptly advise to the Board to enable to the latest sanctioned cost being exhibited in the Pink Book to be circulated along with the Budget. In all cases of revised costs sanctioned by the Board, reference to the letter of sanction should invariably be indicated.

Works once introduced through a Works Programme (including Track Renewal Programme) and taken up after the estimates have been sanctioned by the competent authority should continue to be included every year till they are finally completed, except in cases where the works have reached the completion stage and where funds required if meagre could be found by re-appropriation.

The Works Programme is compiled in the following format:-

Form E. 618WORKS PROGRAMME 1975-76
Demand No................. (Figures in thousands of rupees)

Note.-Years have been shown in the form for the purpose of illustration. In respect of “Works in Progress” reference to item No. of the current year’s Pink Book and also the authority under which the work was first started should be indicated. The works should be arranged as per the Plan Heads.

The items in the Works Programme should be grouped under the following categories while compiling the Works Programmes:-

(i) New Works.
(ii) Works in Progress.
(ii) Works approved in earlier years, which have not been actually commenced and on which no expenditure has been incurred till 30th June of the year previous to the Programme year.
(iv) Works approved in the earlier years but estimates for which have not been sanctioned by 30th June of the year previous to the Programme year.

The works are further made into sub-groups of (i) Works costing more than Rupees Five Lakhs each and (ii) Works costing upto Rupees Five lakhs each. Under (ii) works costing upto Rupees two lakhs each in the case of Track Renewal works and for works costing upto Rupees one lakh each in the case of other works only lumpsum provision should be shown without detailing individual works. Within each sub-group, the works are presented under each Plan Head. A map showing the Railway System and indicating the new lines, doublings, major yard remodelling, important line capacity and signalling works which are in progress as well as proposed should be attached to the Works Programme. An alphabetical index of works and various managerial information regarding critical materials, expenditure position relating to passengers and railways users amenities etc. which will be prescribed by Railway Board should be included.

Integrated Budget.- The Annual Budget of Railways consists of assessment of earnings and expenditure forming part of Revenue Budget and that relating to the investment decisions taken through the Works Machinery and Rolling Stock Programmes. In order to co-relate the decisions relating to all these aspects, a consolidated budget called integrated Budget including Revenue Budget, Works Programme and the Machinery and Rolling Stock Programmes should be submitted by the Railways along with the preliminary Works Programme. The Integrated Budget will include the projections of traffic and earnings, working expenses, the estimated financial results for the ensuing year, and the operating ratio in the proforma specified by the Railway Board. The Railways should also furnish the details of Rolling Stock required on replacement account and addition account, duly co-relating it to the anticipated increase in traffic. In
the covering note to the Integrated Budget the Railways should bring out the effect of the budget proposals on the efficiency of operations as indicated by the operating ratio and the financial viability of the system as revealed by the financial returns on capital investment. After discussion of the Preliminary Works Programme, a revised Integrated Budget should be submitted along with the Final Works Programme duly taking into account the changes that might have taken place in the meantime. The Integrated annual budget may be prepared under the personal guidance of the General Manager and with the assistance of Financial Adviser and Chief Accounts Officer.

Final Works Programme

After having examined the individual Railways Programme, and discussions with the General Managers, the Railway Board will decide the works which should be undertaken during the following year and which should be included in the Final Works Programme. The Railway Administration will then modify their Works Programmes as a result of the Board’s decision and send their Final Works Programme to the Railway Board by the stipulated date.

Section II- Works Budget

Works Budget.-The revised and budget estimates for the construction, acquisition and replacement of assets are briefly known as Works Budget. The revised estimate gives an estimate of funds required for the current year and the budget estimate refers to the following year. For a detailed study of the Railway Budget, Chapter III of the Indian Railway Financial Code should be referred to. The budget estimate for the works are based on the Works Programme approved by the Board. The requirement of funds both for new investments and for works in progress are submitted in the form of “Demand for Grants” in the Works Machinery and Rolling Stock Programme which forms a part of the Budget papers presented to the Parliament. While compiling the Works Machinery and Rolling Stock Programme for presentation in the Parliament only works costing Rupees five lakhs and above are itemised.

Demand for Works Grants

The proposal of Government in respect of sums required to meet the expenditure from the Consolidated Fund of India are to be submitted in the form of Demands for Grants to the Parliament. The Demand shall be for gross expenditure, the credits or recoveries (refer to para 335 of Indian Railway Financial Code) being shown in the form of footnotes to Demands. The Demand for Grants for the Works Budget is :-
Demand No. 16 :- Assets-Acquisitions, Construction and Replacements.

Financing of Works Budget

Works chargeable to Demand No 16.- Assets-Acquisitions Construction and Replacements are financed from railway revenue when it is charged to OLWR or financed from Capital. Depreciation Reserve Fund. Development Fund, Accident Compensation Safety and Passenger Amenities Fund. Expenditure budgeted under “Capital” involves increase in the Capital-at charge of the Railways and hence is the liability for payment of dividend to General Revenue subject to the relief/exemptions granted by the Convention
Committee. “Works Expenditure” of the Railway is thus financed from Revenue, Railway Funds and Capital provided by the General Revenues. The Railway Funds are Depreciation Reserve Fund, Development Fund and Accident Compensation Safety and Passenger Amenities Fund. For Details regarding the operation of the funds, reference may be made to Chapter III of the Indian Railway Financial Code. In the event of the railways revenue surplus not being adequate to fully meet the requirements of Development Fund Expenditure, the budgetary support from the General Revenues would also include temporary loans to finance expenditure from the Development Fund. The expenditure under works Budget of the Railways is, therefore. determined by the resource allocation under various Plan Heads.
Credits or Recoveries. There are certain credits or recoveries which are excluded from the scope of the Demands presented for vote of Parliament. (Refer to para 335 of Indian Railway Financial Code for details). Though these credits or recoveries are outside the scope of the Grants. they are booked in accounts as reduction of expenditure, e.g. credit for released materials. A list of credits or recoveries which should be excluded from the scope of the Demand should be sent in Form 315F along with the revised estimates of the current year and budget estimates of the ensuing year under each Demand.

Distribution of Funds by the Railway Board.-The Grants as voted by the Parliament and the appropriations for charged expenditure (for details of ‘voted’ and ‘charged’ expenditure reference may be made to paras 302 and 303 of the Indian Railway Financial Code) as sanctioned by the President are distributed by the Railway Board among the Railway Administrations and other authorities. subordinate to them as soon as possible after the Budget is sanctioned. The sums so distributed are called “Allotments” and the orders by means of which the allotments are made are called “Budget Orders”. The allotments made out of funds voted by the Parliament are shown as “Voted” and those fixed by the President are shown as “Charged”.

The Budget Orders are accompanied by the final issues of “Demands of Grants” and “Works Machinery and Rolling Stock Programmes” containing the detailed distribution of the Budget allotment made to railway
administrations for working expenses and Capital, Depreciation Fund’, Development Fund, Open Line Works (Revenue) and Accident Compensation, Safety and Passenger Amenities Fund expenditure. The Budget allotment made to railway administration is intended to cover all charges including the liabilities for past years to be paid during the year or to be adjusted in the accounts for it. It shall be operative until the close of the financial year. Any unspent balance shall lapse and shall not be available for
utilisation in the following year.

In the event of the Budget Orders of the Railway Board not being received before the commencement of the financial year, the railway administrations are empowered to incur expenditure pending the receipt of the Budget Order on works which were in progress at the end of the previous financial year. All expenditure incurred under this must be treated as a charge against the allotments eventually made for such works.

When the Budget Orders issued by the Railway Board show any reduction in the estimate originally submitted to them, prompt measures should be taken by the railway administrations to limit the expenditure to the amounts allotted and distributed by the Railway Board.


Rules of Allocation

A careful and well-placed analysis of all expenditure and receipt is most necessary to effective financial control. It is the primary object of any accounting classification. It is necessary to secure uniformity of
accounting to render suitable comparison between the accounts of different railways. It also helps in preparation of budget and estimates. The labor spent in the classification will be of no use if accounts office fails to maintain proper record as per prescribed classification or if the executive omits to review periodically with the assistance of such record of earning and expenditure for which they are responsible.

The primary responsibility for correct allocation of the initial record in support of receipts and payments rests with the executive offices. The account office is responsible for ensurance of correct allocation. Allocation is the process of indicating nature of expenditure (Head of accounts) under which expenditure is to be finally recorded.


The railway expenditure has been classified in to two groups namely: -

1) Capital Expenditure: Under this category such items of expenditure are included which pertain to acquisition of concrete assets, constructions, replacement and renewals of assets such as cost of land, Construction of staff quarters, Construction of Bridges etc.

Expenditure incurred on amenities to passengers and other railway users, amenities to staff, unremunerative operating improvement works when incurred on acquiring concrete assets is not treated as capital expenditure but is accounted for separately under “Development Fund” and “Open Line Works Revenue”.

The Expenditure on renewals and replacements of railway assets is made out from a separate fund commonly known as “Depreciation Reserve Fund”. For the purpose of revenue allocation the revenue
working expenses for the railways are classified under thirteen major heads with a separate abstract for each sub major head.

2) REVENUE EXPENDITURE: - These items of expenditure relate to the
working of railway, repairs and maintenance and operation of rolling stock, Plant and Machinery and equipment’s.

The items of expenditure which are incurred on repairs and maintenance of various assets such as railway track, bridges, service and residential buildings etc. are in the nature of day to day expenses. To keep the
organization running and also to enable the existing assets to give the same services and to keep them in good service condition for achieving the above purpose the revenue working expenses of the railways has
been classified in to thirteen abstracts and each abstract being given a different alphabet to identity the expenditure.

From first April of 1979 the entire structure of railways Demands for Grants and the classification of earning and expenditure has undergone complete revision and accordingly Revenue abstracts have been utilized for recording the revenue working expenses. The Demands have been further classified in to main heads, sub heads and detailed heads to form the allocation for any expenditure. The allocation will be in eight digits, which will in three parts.

Part I: - This part gives the demand applicable as per the nature of expenditure and consists of First 3 digits. The same can also be denoted by corresponding abstract applicable to the demand.

Part II: - Second group of three numerical digits indicate the main head of account which individually indicate the minor head, sub head and detailed head respectively.

Part III: - This part consist of two numerical digits which represents the primary unit i.e. object of expenditure.

Capital nature of expenditure is mainly divided in to five heads of allocation i.e. Capital, DRF, DF, OLWR and Capital Fund.
The introduction, abolition and change of nomenclature of any main/sub head or transfer of detailed head from one main head of one group to any other group or re-arrangement of the abstract is not within the power of Railway Administration. FA&CAO with the approval of GM may open a new detail head or sub head in extreme emergency.


01 Salaries and Wages
02 Dearness allowance
03 Productivity linked bonus
04 House rent allowance
05 City compensatory allowance
09 Wages of casual labors
10 Mileage or K.M. allowance
11 Over Time allowance
12 Night Duty allowance
13 Other allowances
14 Fees and Honorarium
15 Transfer allowance
16 Travelling allowance including air travel
17 Air travel expenses sanctioned in lieu of privilege passes
18 Office expenses
19 Rent for P & T, Telephone charges including trunk calls.
21 Advertisement expenses.
22 Utilities water, electricity etc.
23 Rental for office equipment other than data processing.
24 Printing and stationary including publications.
27 Cost of material from stock.
28 Cost of material direct purchases.
31 Fuel for other than traction.
32 Contractual payments.
33 Transfer of debits and credits from one unit to another.
34 Adjustment of wages on POH and other repairs from WMS account to revenue heads.
36 Excise duty for purchases of material.
37 Customs duty
38 Sales tax.
39 Other expenses.

The following primary units are used for expenditure for works: -

1 Pay and allowance
2 Payments to casual labor.
3 Payments to contractors.
4 Direct supply of material.
5 Stores supplied from stock.
6 Freight on stores.
7 Credit for released material.
8 Others.
9 Transfer of debits/credits effecting Capital Works Expenditure.
10 P.L.B.
11 Excise duty for purchases of material.
12 Custom duty.
13 Sales Tax.

The revised classification of expenditure on works irrespective of whether they are charged to capital, DRF, DF, OLWR will come under single demand no 16 namely Assets acquisition, construction and replacement.
The accounting classification for works expenditure is in the form of 7 digits 4-module alphabetical code.

The first module which is an alpha indicates the source of fund namely capital, DRF, DF, OLWR as the case may be.

The second module of 2-digits is numerical this will represent the standard plan head.

The third module, which is also numerical, will represent the two digits corresponding to the sub-detailed head of classification giving the details of the asset acquired, constructed or replaced.

The last module, which is also numerical 2-digit module, will indicate the primary unit or object of expenditure.
The following plan heads are often used under demand no 16. These are also known as minor heads or plan heads.

The heads of accounts are financed from

CAPITAL: Loan from General Revenues.

DRF, DF, and CAPITAL FUND: Internal Resources.

OLWR, REVENUE: Current Revenue.

Expenditure incurred for creation/acquisition of assets for the purpose of earnings or possession is termed as capital expenditure


Capital bears/is debited with: -

1) The costs of land other than for quarrying and mining purpose.
2) The first cost of construction and equipment of a line under construction whether commercial or strategic whether remunerative or unremunerative and New production unit.
3) The cost of maintenance of a section of a line under construction not opened for traffic.
4) The cost of any additions to the line or equipment estimated to cost more than Rs1/- lakh (New Minor Works Limit) when not chargeable to DF or OLWR.
5) The full cost of replacement of an asset where the original cost was charged to revenue, being within New Minor Works Limit but is now more than Rs1/- lakh provided it is not chargeable to DF or OLWR.
6) The cost of any additional plant and machinery not connected with any specific work where it exceeds the New Minor Works Limit.
7) The cost of any tools and plant specially purchased and any post specially created for the supervision or construction of a work chargeable purely to capital.
8) The cost of construction and equipment of unremunerative new lines (Other than Rolling stock and Land) and the cost of Maintenance of a section of new line not opened for traffic though remunerative.
9) The cost of Quarters w.e.f. 1.4.1974 onwards including the cost of fans and other amenities in type I and II Railway quarters constructed prior to 1.4.1974

Capital is credited with : -

1) The cost at the debit of capital of any Asset (other than land) which is abandoned or disposed off without being replaced.
2) The sale proceeds of any land acquired at the cost of capital when it is sold or surrendered.
3) The difference between the cost at the debit of capital of a replaced asset and the cost of its replacement, when the cost of replacement is chargeable to DRF and is less than the cost at the debit of capital.
4) The cost of labour originally incurred in laying the assets or part thereof, when such items are subsequently transferred for the use on a new work.
5) The original cost at the debit of capital of an asset replaced at the cost of OLWR / DRF.

Capital fund.

The existing Revenue Reserve Fund has been abolished, with effect from 1992-93. In order to reduce over capitalization and to enable Railways to raise internal resources for meeting their increasing requirements for
capital expenditure a new fund “CAPITAL FUND” has been created. This fund will bear the expenditure hither to chargeable to capital subject to availability of funds and provision in the sanctioned budget.

The expenditure on plan head 12 to 16, 21, 31, 32, 34 to 36, 41, 42,52,53, 61, 62, 64 will be financed from the capital fund where as expenditure on plan head 11 (New lines) 51(Staff quarters) 81 (MTP) will
continue to be financed from the loan capital i.e. General Revenue.

Depreciation Reserve Fund.

In order to meet the cost of replacement of an asset, the normal life of which is over, due to wear and tear and requires replacement, DRF has been created.

Depreciation Reserve Fund bears / is debited with

1) The cost of Replacement and Renewals of works whether originally provided from Capital, Development Fund, Capital Fund.
2) The costs of replacement of ballast involving improved type of ballast.
3) The original cost of an asset at the debit of capital (other than land) replaced at the cost of OLWR.
4) The cost at the debit of capital or DF of an asset (other than land) which is abandoned or disposed off without being replaced.
5) All expenditure incurred on replacement of Rolling Stock.
6) The cost of tools and plant specially purchased and of any post specially created for the supervision of a work purely chargeable to DRF.
NOTE. Replacement of assets created out of OLWR is chargeable to OLWR if the cost of replacement is not more than Rs1/- lakh.

Depreciation Reserve Fund is Credited with : -

1) The amount of annual contribution from the Railway Revenue.
2) The amount realized from the disposal of an asset ( at the debit of capital or DF ) the original cost of which is more than RS 5000 and the amount realized from the disposal of the materials, released from a
work, replaced at the cost of DRF, after deducting the incidental charges.
3) The amount of interest earned on the balance of the fund.

Development Fund

In order to arrest over capitalization of Railway undertaking the government have decided that all un-remunerative new lines, works for passengers amenities, staff welfare and amenities works, operational
improvement works should be charged to this fund. This fund was instituted with effect from 1/4/1950.

Development Fund is Debited with 

DF I  The cost of all passenger and other user's amenity works including additions and replacement of the existing and new works. 
DF II Cost of Labour Welfare Works including additions to existing and new works when cost is exceeding Rs1,00,000/-
The cost of construction of staff quarters including additions to existing quarters will be charged to capital with effect from 1/4/1974.
DF III The entire cost of works when exceeding RS 10/- lakhs which are un-remunerative but are required for improvement of operational efficiency including additions and alterations, replacement of existing and new
DF IV Safety works.

Development fund is credited with

1) Amount transferred from Revenue Reserve Fund.
2) The amount appropriated to it each year from surplus.
3) The cost at the debit of DF of an asset which is abandoned or disposed off without being replaced.
4) The difference between the cost at the debit of DF of replaced asset and the cost of its replacement when the cost of replacement is chargeable to DRF and is less than the cost at the debit of DF.
5) The amount of interest earned on the balance of the fund.

Open Line Works Revenue

This head is financed from Revenue and bears / debited with

1) Cost of all works other than those related with passenger and other users amenity works chargeable to DF whether new, additional improvements, replacement and renewal works when the cost is less than RS 1,00,000/- i.e. within the limit of new minor works.
2) Cost of such replacement and renewals costing less than RS 1,00,000/- when not chargeable to capital, capital fund, DRF, DF, and Revenue.
3) The cost of all un-remunerative works for improving the operational efficiency when the cost is less than RS 10/- Lakhs.
4) The cost of dismantling handling and shifting including freight to stores depot in respect of replacement works.
5) The expenditure on investment in share capital of Railwaymen’s consumer Co-operative societies up to RS 2,500/- per society.

OLWR is credited with the amount realized from disposal of an asset without being replaced, the original cost of which was charged to OLWR and amount realized from disposal of the asset replaced at the cost of

List of passenger amenities.

1) Provision of overhead and ground level arrangement at stations for filling water in carriages, water supply at stations including purification plants water coolers, or water trolleys provided at stations.
2) Provision of waiting accommodation including provision of benches and improvement to the existing arrangements.
3) Provision of refreshment rooms, retiring rooms, vendor stalls of all description except those which are required to be provided by the contractors themselves.
4) Provision for improvements to latrines provided at stations for the use of bonafide Railway passengers.
5) Provision of bathing facility at station for use of passengers.
6) Improvement to existing carriages such as provision of fans improved lighting, bigger water tanks etc intended to provide improved facilities to passengers.
7) Improved lighting and provision of fans on platforms or in waiting hall and sheds etc. to cater to the requirements of Railway passengers.
8) Exhibition of sheet time table in glass frame or on black board to cater to the requirements of the passenger.
9) Works under all the above heads meant to cater the Railway passengers during religious fare (mela) required for a period exceeding six months.

Other Railway users amenities.

The persons availing the facility of parcels or goods services are termed as other Railway users. The facilities provided at parcel office or goods sheds can be termed as other Railway users amenities.

1) Arrangement for drinking water including water coolers, water trolley etc.
2) Waiting accommodation including provision of various types of premises.
3) Refreshment rooms including vendor stalls except those which are required to be provided by the contractors themselves.
4) Provision of latrines or urinals.
5) Lighting arrangement and provision of fans.
6) Any other work considered essential i.e. inquiry office, information Centre etc.

Labour Welfare Works.

The works which are carried out as a welfare measure for the work force in general are called as Labour welfare works. The list of labour welfare works is as under.

1) Provision of new hospitals, dispensaries, school etc. Additions, Alterations and improvements to the existing work.
2) Provision of new institutes, recreation rooms, swimming pools, sports ground, reading rooms including improvements to the existing ones.
3) Provision ad improvements to health and welfare services, child welfare and maternity centers, cooling arrangements for workshops and rest rooms for workmen.
4) Provision and improvements of sanitation water supply, road lighting and marketing facilities in Railway colonies.

Un-remunerative works but essential for increasing operational efficiency.

Works arising out of the need for keeping operational methods upto the latest requirements and standards are as under.

1) Removal of infringement at stations.
2) Re grading of permanent way and improvements to curves.
3) Converting dead end sidings into through routes and provision of through loops at station.
4) Provision, extension and modernization of catch sidings.
5) Lighting of sheds and stations whether new works or improvement to existing works.
6) Duplicating or strengthening girders by adding material.
7) Provision and improvements and additions to drivers and guards running rooms.
8) Provision of fire fighting equipments at stations.


Financial Rules


Introduction and definition: -

Budget is a statement of the estimated annual receipts and expenditure both on capital as well as revenue transactions of an organization. It is a process of planning and reviewing the activities of an organization. Railways being a Govt. of India department, receipts and payments of the system were use to be merged in the General Budget of the Govt. of India. As a result of the recommendations of the “ACWORTH COMMITTEE” during 1920-21, it was decided to separate the finances of Railways from General Finances with the objects of securing stability for General revenues and to strengthen the Railways finances. This is generally known as “Separation Convention of 1924”. Since then the Railway Budget is submitted in advance of the General budget.

In terms of article 112 of the Constitution of India, the budget is presented to both the Houses of parliament viz. Lok sabha and Rajya sabha.

The expenditure on Railways may be either voted or charged. The expenditure covered under the former category requires the approval of parliament. But in respect of charged expenditure the sanction of the President of India is conveyed without being submitted for the vote of Parliament. The items of expenditures that are covered under this category are as under: -

i) Interest, sinking fund charges and redemption charges on loan and debts.
ii) Salary, allowances and pension payable to or in respect of Comptroller and Auditor General Of India.
iii) Any sum required satisfying any judgment, decree or award of any court or arbitration tribunal.
iv) Any other expenditure declared by the constitution of India or by Parliament by law to be so charged.



In terms of article 266(I) of the Constitution of India, a fund is created which will act as a reservoir in which all the earnings flow (credited) and from which the expenditures of Government as authorized by the Parliament will be made. Central Government is having Consolidated Fund of India. Any expenditure to be made from this fund needs Parliament’s sanction/votes. For this purpose, a bill known as “Appropriation bill” is required to be introduced by Railway minister in Parliament. The bill is discussed and when passed by the Parliament is send to the President of India for his assent. When the assent is given by the President, the bill gets converted into the “Appropriation Act” and this act enables to withdraw the money from the Consolidated Fund Of India.


Normally all expenses incurred by the Government should be met out of consolidated fund of India with the vote of the parliament or Appropriations sanctioned by the President. However, to meet unforeseen contingencies when the expenditures cannot be met out of available grants and the vote of the parliament cannot be obtained due to the same not being in session or dissolved the expenditure is met out of fund created for the purpose under article 267(II) which is known as “Contingency Fund Of India”. The fund is under the control of President of India. As far as Railways are concerned, Financial Commissioner (Railways) controls the fund.

This fund is used as and when the contingency arises. Money can be withdrawn from this fund on an application addressed to the President and is given as an advance which needs recoupment. The amount from this fund can be withdrawn when the parliament is not in session and to meet the unforeseen expenditure, which cannot be met from out of the amount of grant available.

As soon as parliament comes to session an “Accommodation bill” is passed and amount is recouped from Consolidated Fund of India.


The budget proposals of the expenditures to be met out from the “Consolidated fund of India” should be presented in the form of Demands for Grants. Parliament has got the powers to assent or to refuse to assent or to reduce the amount proposed by the Railway Ministry during the course of discussion on Railway budget. Such powers are exercised to cut motion. The voted part of expenditures together with the charged
appropriation are presented to the parliament in the form of Demands for Grants. At present there are sixteen demands for Grants which are grouped under seven categories viz.


Preparation of annual budget is done by the Railway Administration and other production units. The revised estimates for the current financial year and the budget estimate for the ensuing financial year are prepared and submitted to Railway board in the month of November every year.

The estimation is done on the basis of –

1) Actual expenditure for the previous year under each demand.
2) Actual expenditure for the first seven months of the previous financial year under each demand.
3) Actual expenditures for the first six months of the current financial year and the approximate expenditures for the seventh month.

The revised requirement of the remaining five months of the year are thus worked out which are known as revised estimates for the current year. The same become budget estimates for the ensuing financial year after taking into account special features and known factors for the next financial year.

The budget is presented to the parliament duly compiled by the Railway board in the month of February each year on the dates fixed for the purpose.


The consolidated budget proposals are presented before the parliament by Honorable Railway Minister in the following form –

1) The speech of Railway Minister (Yellow Book)
2) The book of Demands for Grants(Blue Book)
3) The explanatory memorandum(White Book)
4) Works, Machinery and Rolling Stock Programme(Pink Book)
5) Budgetary Notes(Green Book)


In terms of article 114(I) of the Constitution of India, after the budget is voted by the Parliament and Appropriations sanctioned by the President, an Appropriation bill is introduced in the Parliament, on passing of the same, it becomes Appropriation Act. This act authorizes Government to withdraw money from consolidated fund of India to the extent sanction for incurrence of expenditure.


The following are the rules of Re-appropriation: -

1) Re-appropriation is not permitted from one demand to another demand.
2) Re-appropriation is not permitted from capital to revenue demands and vice versa.
3) Re-appropriation is not permitted from voted expenditure to charged expenditure and vice versa.
4) Any surplus amount that remains unutilized by the end of the financial year lapses with that year and is not available for spending during the next financial year.
5) Railway Board is empowered to make re-appropriations within the same demand.
6) GM is empowered to make re-appropriations from one subhead of demand to another subhead of demand but within the same demand.


In order to ensure that the budget allotments placed at the disposal of the Railway administration is not exceeded and to ensure that funds allotted are sufficient to cater to the requirements, the budget is reviewed thrice in a year.


The first review is conducted in the month of August, hence is known as August review.In this review, the actual expenditure of the first three months and approximate expenditures for four months is compared with the budget grant for the current year and actual expenditures for the previous financial year. The expenditure is also compared with the budget proportion and the actual expenditures of the corresponding period of
the previous financial year.

The variation in above figures are analyzed and net additional requirements(if any) are asked for during this review.


The second review is conducted in the month of November each year, which is known as revised estimate for the current financial year and budget estimates for the ensuing financial year. The actual expenditures for the first six months and approximate expenditures for the seventh month of the current financial year is compared with –

1) Budget proportion
2) Expenditure incurred during the last financial year.
3) Expenditure incurred during the corresponding period of the last financial year.
4) Budget grant.

Additional requirements or surrender of funds, if any can be done at this stage.


The third review is conducted in the month of February year and is known as Final Modification. Actual expenditure during first nine months and approximate expenditure for the tenth month is reviewed and compared with –

1) Budget grant / Revised grant (if received).
2) Budget proportion.
3) Actual expenditure during the last financial year.
4) Actual expenditure during corresponding period of the last financial year.


After the closure of accounts for the financial year, report is submitted to the Parliament as to how far the budget estimates have been realized i.e. as to how the funds voted by the Parliament and Appropriations sanctioned by the President have been utilized. Three sets of figures are reported namely, Original Grant, Final Grant and Actual Expenditure. Comparision between latter two is made and Variations are worked out
duly explaining the same.
The Appropriation Accounts along-with Railway’s Audit report thereon are presented to the Parliament through Public Account Committee, which is a committee nominated by the Parliament. On passing / acceptance of the Accounts by the parliament, the excess over sanctioned appropriations is regularized and thus cycle of Parliamentary control over Railway’s Finance is ensured.


The expenditure on railways may be either revenue or capital, chargeable to works demand. The control over expenditure exercised against these heads involves two aspects. –

a) Control with reference to sanctions.

i) Delegation of powers i.e. Railway board to General Managers and to lower sanctioning authorities.
ii) In exercise of their financial powers, the sanctioning authority must pay due regard to the “Cannons/Standards of Financial Propriety”.

b) Control over actual expenditure incurred/booked in the books of railways.

i) Control over expenditures against the budgetary allotments.
ii) Control over expenditures against the estimated cost as shown in works, machinery and rolling stock programme.

In order to ensure that the budget grants as voted by the Parliament and appropriations as sanctioned by the President are utilized for the purpose they are voted/sanctioned, the control is exercised. The requirements of railways are more as compared to the resources available, hence it is important to exercise control over expenditure. Further, railway is also a commercial organization in addition to Government organization, hence
if railway is to earn profit, it is necessary to ensure that control over expenditure is exercised. The control over expenditure is exercised by –


As the sanctioning authority for incurrence of expenditure, the parliament exercises control over expenditure by reviewing the Appropriation accounts and the audit report thereon critically. The scrutiny is done by the Public Account Committee on behalf of the Parliament with a view to satisfy that the amount shown in accounts as having been spent was legally available and was spent for the purpose for which the amount was
made available.

The control over expenditure is exercised by the Parliament through –

i) Railway convention committee.
ii) Estimates committee.
iii) Discussion on Railway budget.
iv) National Railway user’s consultative committee.
v) Committee on subordinate Legislation.
vi) Committee on Government assurances.
vii) Public Accounts Committee.


Incurrence of expenditure is subject to preparation or prior vetting of the estimates by the Accounts department, sanction of the competent authority being obtained. This is ensured by the executives. He further ensures that the work progresses as per the sanctioned estimate and budget provision. The provisions of Cannons/Standards of Financial Propriety are also to be kept in view, while granting sanctions to the

Cannons/Standards of Financial Propriety –

In exercise of their financial powers, the sanctioning authority must pay due attention to the following principles –

i) The expenditure should not prima facie be more than the occasion demands and that every Government should exercise the same vigilance in respect of expenditures incurred from public money as a person of ordinary prudence, would exercise in respect of expenditure of his own money.
ii) No authority should exercise its powers of sanctioning expenditure to pass an order, which will be directly or indirectly to its own advantage.
iii) Public money should not be utilized for the benefit of a particular person or section of a community unless –
a) The amount of expenditure involved is insignificant.
b) A claim for the amount could be enforced in a court of law.
c) The expenditure is in pursuance of recognized policy or custom.

iv) The amount of allowances such as travelling allowance granted to meet expenditure of a particular type should be so regulated that the allowance are not on a whole a source of profit to the recipient.


The internal check carried out by the Accounts office on bills, vouchers, estimates and proposals is primarily to ensure that the same are as per codal provisions, however, the end goal is to ensure control over expenditure.

On passing of the bills and adjustment of vouchers, the same are entered in subsidiary registers like Revenue allocation register for revenue expenditure and Works register for works expenditure. At the end of the month these registers are closed and Control statements are prepared and submitted to the executives to enable them to know the pace of expenditure. Control over expenditure is exercised by comparison of these
statements with budget proportions for the month and to end of the month. Similarly, the totals of works registers are compared with budget grant/proportion and estimates to exercise control over expenditure against budget grant and sanctioned estimates.


The audit department as representative of The Comptroller and Auditor General Of India, scrutinize the Appropriation Accounts with a view to see that the accounts are properly maintained and the figures exhibited in the appropriation accounts are correct as per the books. They also ensure that the expenditure is regular and properly maintained. The scrutinized Appropriation Accounts along-with remarks offered by the
audit are submitted to the Railway Board. Railway Board submits the consolidated Appropriation Account to the Parliament.


The expenditure on Indian Railways is fixed in nature to the extent of 60%, to exercise control over expenditure and to know the result of expenditure, a new scheme known as Performance budget is introduced on the Railways. As per this scheme, availability of funds and results obtained from its utilization are compared to know whether the results are to the extent they were expected. In other words, the financial input is compared with the physical output. So far this scheme is put in use for demand no.10 i.e. Operating Expenses – Fuel, since the norms of comparison could be laid down. The scheme is still in the experimental basis on the Railways and will take a lot of years before it could be successfully implemented.


The annual budget of the Railways consist of assessment of earnings and expenditures for revenue budget and that related to investment decisions taken through Works, Machinery and Rolling stock programme i.e. Works Budget. In order to correlate the decisions relating to all aspects, a consolidated budget called Integrated budget is submitted by Railway for presentation to the Parliament. This budget includes Revenue
as well as Capital budget.

This budget is prepared under personal guidance of General Manager with FA & CAO’s assistance. The Integrated budget will include the projection of traffic and earnings, working expenses, estimated financial results for the ensuing financial year, operating ratio as well as the financial viability of the system.


Zero base budgeting can be defined as –

1) An operating planning and budgeting process which requires each manager to justify his entire budget request in detail and shifts the burden of proof to each manager to justify why he should spend any amount. The procedure requires that all activities and operations be identified in decision packages, which will be evaluated and ranked in order of importance by systematic analysis.
2) In most literal sense, Zero base budgeting implies constructing a budget without any reference to what has gone before, based on a fundamental re-appraisal of purposes, methods and resources.
3) Zero base budgeting is a technique/management tool which provides a systematic method for involving all operations and programmes current or new, allows for budget reduction and allows re-allocation of resources from low priority programme.

Budget making under Zero base budgeting involves the following: -

i) Identification of Organization’s structures management, decision units and objectives.
ii) Formulation and development of decision packages.
iii) Review and prioritization of decision packages.
iv) Allocation of resources for the chosen decision packages i.e. preparation of budget.