FINANCIAL AND COST CONTROL
IN RAILWAY WORKSHOPS
Ø
V.A.Padmanabham,SAO/SF/SCR.
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 Programme.
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 barring 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 spill over in costs.
- - - Page 2
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 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.
5.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.
6. 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 turn over ratio.
--Page 3
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.
0ther 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.
--Page 4
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 analyse
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 utilisation 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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