“ Marketing Profit Accountal”in the case of Locos sold by DLW to non-IR customers and Creation of “ Useable Marketing Fund”.
1. Date of issue of letter from R.B. is 17.05.04 (SN-2). Delegation of powers to GM's of P.U. is available w.e.f. 17.05.04. Profits upto 16.05.04 are not to be utilised for making use of this delegation of powers.
2. From 17.05.04 onwards, we have to keep track of profits/losses as the case be - as an independent accounting figure in Ledger of Books Section so that it can be defined as the "Useable Marketing Fund" for the purpose of implementation of R.B.'s orders.
3. We can consider the following to ensure practical working:-
3.1 Locos/DG Sets sold on 17.05.04 or after are to be considered for profit/loss for this delegation of power. This is despatch date.
3.2 Any balance payment received/to be received in respect of Loco/DG Set for which despatch was made prior to 17.05.04 would not be included in this profit/loss amount. Any advance amount received by DLW on a date earlier to 17.05.04 for Loco/DG Set to be despatched on 17.05.04 or after will be included in profit/loss.
4. Profit/loss in respect of a locomotive/DG set is to be calculated finally as difference between the final batch cost report + proforma charges + BHEL's supplementary payment for P.L.items if any and final sale-price as received from NRC. The Profit/Loss will be transferred to the " Usable Marketing Fund" through JVs just after Batch is closed and profit worked out.
5.
Timely finalisation of Batch cost
report:
5.1 It will be good practical convenience to treat each NRC order as a separate W.O./Batch Order so that its Batch Cost Report can be completed and finalised at the earliest. If more than one customer-orders or one RSP and one NRC order is to be clubbed as one Batch as a special case, it may only be done with the approval of Dy.CME/Plg. and Dy. FA&CAO/Workshop.
5.2 Dy.CME/Plg. will advise completion certificate and all complete booking as per Job Card & Route Card to Dy.FA&CAO/Workshop within 30 days of despatch of loco/DG set to NRC i .e.(D+ 30 days). Batch Cost Report will be completed by Workshop Costing Section within next 10 days i.e. (D+ 30 days+10 days). A copy will be sent to CMgM & Sr.AFA(M.F.) apart from others.
5.3 At present, one annual TV is made for transfer of balance to Development Suspense Account vide File No.A/CA/16 Part I. With a view to focus attention on Profit / loss balance, monthly T.V. will be made transfering balance to Development Suspense,(RSP/ZR), pre-17.5.04 balance and post 17.5.04 balance.
6. Order on BHEL for supply of electrics will need to be on fixed price basis or at best on PVC formula as per Railway Board due to IEEMA with the base-prices not to be subject to MOF's periodical final price fixation exercise. This will help in closing the batch reports early. Further action depends on this.
7. Duty/Tax related figures:-
7.1 Modvat : Figure of MODVAT actually realised in NRC order is to be added to sale price received from NRC and is to be advised by SMgM(A) to Sr.AFA/Cost. as soon as loco is despatched. This also presupposes that there will be no supplementary Modvat situation like supplementary payment to BHEL. However, any supplementary Modvat becoming available at a date later to closing of Batch Cost or any amount of Modvat getting disallowed at a date later to closing of Batch Cost Report will be outside the scope of Profit & Loss for this Batch, as a simplification measure.
7.2 DBK: Amount received as Duty Drawback in export NRC orders is to be taken as an addition to sale-proceeds. Even if it is received after closing of Batch cost report, it should be suitably added to sale-proceeds of the relevant order or credited to "Useable Marketing Fund" through a separate Exp./Receipt No. to be used by Marketing Division only.
7.3 E.D. paid by DLW on NRC orders from MODVAT balance: This will not be treated as expenditure for this exercise.
7.4 E.D. paid by DLW on NRC order in cash (when MODVAT balance is not sufficiently available): This will be treated as an expenditure and shown under NRC Batch cost report on specific intimation from SMgM(A) to Sr.AFA/Costing and Sr.AFA(Marketing Finance). Payment in cash itself shall be made in consultation with Marketing Finance.
7.5 E.D..received by DLW from NRC Customers: At present E.D. on locos turned out from DLW to NRC is paid from MODVAT. If supply order for sale of loco provides for reimbursement of E.D. to DLW, such an amount may be credited to WMS as at present like 'receipts'. This will not be part of sale-proceeds.
7.6 Warranty replacement and other minor/misc. etc expenses:-
In case any such expenses are incurred after the supplies have been completed, order has been executed and Batch Cost report has been issued, then such expenses will be booked to another Exp. No. under Marketing deptt. and be treated as Misc. expenditure under "Usable Marketing Fund."
8. Development Suspense Account:-
8.1 Break-up of Development Suspense account may be shown under Rlys. & "NRC" headings and not Rlys & "PSU" as shown now in the monthly statement of Costing Section. Total figure of monthly Development Suspense head (Rlys. +PSU) also appears in Ledger of Books Section. This may continue. Both may continue to be reconciled on monthly basis between Costing Section and Books Section. A joint certificate is to be recorded by Sr.SO/Costing & Sr. SO/Books after reconciliation on the date of closing of monthly accounts.
8.2 The balance shown under this head is cummulative. However, year wise movement can be seen by looking into annual closing balances.
8.3 Following accounting heads are being used at present to depict Development Suspense balance.
WMS 7200 Minor Head
D.S. (Development Suspense) 7240 Sub Head
Further, following head may be provided :-
D.S./ZR & RSP 7241 Detailed head.
Pre. 17.05.04/ balance 7242 -do-
Post 17.05.04 balance 7243 -do-
Therefore, detailed-heads 7241, 7242 and 7243 under sub-head 7240/ Main-head 7200 may be created / operated in the accounts of Costing & Books Sections.
8.4 Any plus amount appearing under head 7243 will be profit balance Post- 17.5.04, on cumulative basis and can be used by DLW in terms of Rly. Board's letter No.2004/F(S)/PW/7 dated 17.5.04 and FX (II)/2004/PW/5(2) dated 26.04.04 in accordance with delegation of power approved by Rly. Board. Pre-17.5.04 balance may be used for adjustment of difference between manufacturing cost and transfer price for RSP items/ locos as usual, without any change in procedure.
8.5 (-) Figure will show profit and (+) figure will show loss. Collectively, this will be called " Useable Marketing Fund" at DLW.
9 Following records are laid down for this :-
9.1 Each Batch cost report will show post 17.05.04 Profit/Loss - Costing Section.
9.2 Control Statement to provide post 17.05.04 Profit/Loss Column- WMS Section.
9.3 Costing Section to maintain a Marketing Order wise Register on the lines of Works Register, posting expenditure and income and working out Profit/Loss. Monthly posting will be done on Exp and Income side.
9.4 Same for Marketing Finance. Records under Para 9.3 and 9.4 to be reconciled monthly.
9.5 Ledger will have a separate head for Profit/Loss.
9.6 Costing Section will prepare a monthly Income and Expenditure Account, showing O.B. and C.B. on commercial pattern.
9.7 All these records and transactions including transactions relating to expenditures and receipts under " Useable Marketing Fund" are auditable like the other records and transactions at DLW.
10. For booking of expenditure to Profit balance ( Detailed- head 7243), the estimate / proposal, contract/P.O. and expenditure voucher may be allocated as under (to be defined)-.7243. This will be a debit booking. Rules for financial concurrence / vetting , sanction and placement of P.O., certification of fund, allocation of accounting head & pre-audit of voucher and issue of cheque / demand draft will remain as per extant procedure. This expenditure is not chargeable to DLW's budget allotment, as clarified in Para 12.
11. At present, sale of spares being a small amount is kept out of this scheme.
12. Budgetting:
12.1 Expenditure from Profit balance will be outside the Budget - order issued by Railway Board. However, DLW's requirement of cash-out go will need to be assessed and included in cash out-go to be submitted to. Rly. Board. This may be ensured between CMgM office, Marketing Finance, Books Section & Bill Passing Section as is done for other railway expenditure. This will be shown as a separate figure. Cash outgo as apportioned by Dy.CAO/G, for profit balance(Useable Mareketing Fund) may not be used for other expenses and vice-versa.
12.1 CMgM is requested to prepare each budgetary review (at A.R., R.E./B.E. and F.M.)stage-wise estimates and forward to FA&CAO after concurrence of Dy.FA with the approval of CME. Final approval of GM will be obtained by FA&CAO( Budget Section ) and communicated to CMgM.
13. Items of expenditure from Profit balance :-
13.1 As per R.B.'s letter No. 2004/F/S/I/PW7/1 dated 17.05.04, expenditure from Profit balance (accrued after 17.05.04) is to be utilised for " Development of new items, product diversification, marketing efforts and engagement of consultants for sale to NRC and for exports". Limit is upto Rs. 5.00 crore p.a.(Rs. 1 crore in each case) out of the profit accruing from sales to NRC and exports. Such works are to be sanctioned by G.M. with personal concurrence of FA&CAO and cannot be delegated further. For this purpose, a Register of works chargeable to Profit balance, to observe the financial limit with all relevant details, shall be maintained in CMgM office and with Sr.AFA(Marketing Finance) and will be reconciled on monthly basis. This will be Part A of Marketing Expenditure Register. .
13.2 DLW provides for some amount under Market Development Fund (MDF) in its quote, depending upon the merit of the case. There is no separate accounting head for this, because this amount is received as part of sale-proceeds. Thus, profit/loss earned by DLW includes element of M.D.F. This MDF can be used for incurrence of expenditure upto a ceiling of Rs. 250/- per head per occasion subject to an annual ceiling of Rs. 10,000/- in consultation with FA&CAO and approval of GM/PU (R.B.'s letter No. F(X)/II-2004/PW/5(2) dt. 24.04.04. Register(s) as stated in Para 12.1 will show such details also so that ceiling can be observed. This will be Part B of Marketing Expenditure Register.
13.3 All associate finance work for Para 13.1 and 13.2 shall be done in Marketing Finance Section of FA&CAO Office. Fund certification against availability of Profit balance post-17.5.04 (Useable Marketing Fund) will be done by Marketing Finance section, duly keeping CMgM office informed.
14. Monthly managerial report of Production Unit to Rly. Board on balance under WMS Account, Development Suspense Account, position of Batch Cost reports etc:-
This report will continue to be sent to Rly. Board from Costing Section through submission of six statements. Statement No.2 will incorporate a new column to show Profit balance(Useable Marketing Fund) from NRC business ( Post-17.5.04).
15. It is possible that some amount of profit may become available as the "Useable Marketing Fund" just after closing of the first NRC/Export Batch after 17.05.04. However, it may also possible that there may be some loss in another batch as may happen in normal business. Thus, before starting to enter into financial commitment in use of "Usable Marketing Fund", it is appropriate to establish and stabilise a reasonanble amount-balance say Rs.1.00 crore, under this. Also, some balance must always remain under this head just to meet any exigency /commitment. It is obvious that such expenditure cannot be met from RSP budget.