Chapter 2 Appropriation Accounts

Chapter 2 Appropriation Accounts

This Chapter outlines IR financial accountability and budgetary practices
through audit of Appropriation Accounts.
Railway Budget is an instrument of Parliamentary Financial Control and at the
same time, an important management tool for Ministry of Railways (MoR).
Parliamentary Financial Control is secured not only by the fact that all 'voted'
expenditure receives Parliament's prior approval, but also by the system of
reporting back to it, the actual expenditure incurred against the
Grants/Appropriations voted/approved by Parliament. The statements, which
are prepared for presentation to Parliament, comparing the amount of actual
expenditure with the amount of Grants voted by Parliament and
Appropriations sanctioned by the President are called the “Appropriation
Accounts”.
Appropriation Accounts detail the accounts related to expenditure of IR for a
particular year as compared to the appropriations for different purposes as
specified in the schedules appended to the Appropriation Act passed by
Parliament. These Accounts list the original budget allocation, supplementary
grants, surrenders and re-appropriations distinctly and indicate the actual
capital and revenue expenditure on various specified services vis-à-vis those
authorized by the Appropriation Act in respect of both charged and voted
items of budget. Appropriation Accounts thus facilitate management of
finances and monitoring of budgetary provisions and are therefore
complementary to Finance Accounts.
The Appropriation Accounts are signed both by the Chairman, Railway Board
and by the Financial Commissioner, Railways and transmitted to the
Comptroller and Auditor General (C&AG) of India for audit. Audit by the
C&AG of India seeks to ascertain whether the expenditure actually incurred
under various grants is within the authorization given under the Appropriation
Act and also whether the expenditure so incurred is in conformity with the
law, relevant rules, regulations and instructions.
2.1 Summary of Appropriation Accounts

IR is authorized for expenditure through operation of 16 Grants comprising of

15 Revenue Grants22 (Grants number 1 to 15) and one Capital Grant23 (Grant
No.16). Revenue grants were financed through the internal resources
generated by IR through its earnings during the year. The Capital grant was
funded mainly through the General budget, internal resources and share of
diesel cess from Central Road Fund24.

22
Grants detailing working expenses and other revenue expenditure as voted by Parliament.
23
Grant detailing expenditure on Assets Acquisition, Construction and Replacement voted by
Parliament.
24
A dedicated Central Road Fund was created by the Central Government from collection of cess from
petrol and diesel. A share of collection is provided to Railways for construction of road over/under
bridges and safety works at unmanned railway crossings.

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2.1- Summary of Appropriation Accounts 2014-15

(` in crore)

Original Grant/ Supplementary Total Actual Saving (-) /

Appropriation Grant Sanctioned Expenditure Excess (+)
Grant

Voted
Revenue 194901.56 5342.27 200243.83 191555.67 (-) 8688.16
Capital 98565.36# 467.55 99032.91 93308.62 (-)5724.29
Total Voted 293466.92 5809.82 299276.74 284864.29 (-) 14412.45
Charged
Revenue 142.27 4.43 146.70 121.16 (-) 25.54
Capital 119.35 57.23 176.58 147.76 (-) 28.82
Total 261.62 61.66 323.28 268.92 (-) 54.36
Charged
Grand Total 293728.54 5871.48 299600.02 285133.21 (-) 14466.81
#This excludes an amount of ` 30,100 crore given by the Ministry of Finance out of National
Investment Fund (NIF) as part of General Budgetary Support at Budget Estimate stage and
` 28,185.12 crore at Final Modification stage.

The Table 2.1 lists out the total expenditure of IR as ` 2, 85,133.21 crore during
2014-15, of which nearly 67.22 per cent was spent on revenue grants which
include working expenses on administrative, operational and maintenance
activities while 32.78 per cent was spent on capital grant dealing with creation
and augmentation of infrastructure facilities through Assets Acquisition,
Construction and their Replacement/Renewal. This Table also indicates savings
of 4.35 per cent (` 8,713.70 crore) under revenue grants and savings of 5.80 per
cent (` 5,753.11 crore) under capital grant against the sanctioned provisions
available in 2014-15.
An analysis of grant-wise expenditure revealed that the net saving of
` 14,466.81 crore was a result of savings of ` 14,957.18 crore under 13 revenue
grants, two segments of capital grant, eight revenue appropriation25 and three
segments of capital appropriation, adjusted by an excess of
` 490.37 crore in two revenue grants, three revenue appropriations, one
segment of capital grant as are shown in Appendix-2.1.

2.1.1 Revenue Grants

IR operates 15 Revenue Grants. These are functionally clubbed under six

distinct groups as listed in Table 2.2:-

25
Appropriation refers to expenditure charged on Consolidated Fund of India.

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Table 2.2- Grants operated by Railways

No. Particulars Six Distinct Group
1 Railway Board Policy Formulation and
2 Miscellaneous Expenditure (General) Services Common to all
Railways
3 General Superintendence and Service on Railways General Superintendence
and Service on Railways
4 Repairs and Maintenance of Permanent Way and
Works
5 Repairs and Maintenance of Motive Power Repairs and Maintenance
6 Repairs and Maintenance of Carriages and Wagons
7 Repairs and Maintenance of Plant and Equipment
8 Operating Expenses-Rolling Stock and Equipment
9 Operating Expenses-Traffic Operation
10 Operating Expenses-Fuel
11 Staff Welfare and Amenities
12 Miscellaneous Working Expenses
Staff Welfare, Retirement
13 Provident Fund, Pension and Other Retirement
Benefits and Miscellaneous
Benefits
14 Appropriation to Funds
Railway Funds and
15 Dividend to General Revenues, Repayment of loans
Payment to General
taken from General Revenues and Amortization of
Revenues
over Capitalization
The following diagram depicts group-wise expenditure for last three years which
shows an increasing trend in expenditure of Indian Railways:
Diagram 2.1 Trend of Revenue Expenditure-Group-wise during 2012-13 to 2014-15

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The following Pie diagram depicts the group-wise expenditure in 2014-15:

Diagram-2.2 Group wise Revenue Expenditure (2014-15)

Group-wise estimates, expenditure and variation under the revenue grants are
detailed in Table 2.3.
Table- 2.3 Group wise Estimates, Expenditure and Variation (2014-15)

(` in crore)
Particulars Original Supplementary Total Actual Variation Percentage
Grant/ Provision Sanctioned Expenditure w.r.t. variation
Appropriation Grant Sanctioned
Grant
(-) Saving/
(+) Excess
Policy Formulation
and Services
1111.57 00.00 1,111.57 1,170.44 (+) 58.87 (+) 5.30
Common to all
Railways
General
Superintendence and 6472.70 1.37 6474.07 6107.15 (-) 366.92 (-) 5.67
Service on Railways
Repairs and
32105.96 918.80 33024.76 32367.27 (-) 657.49 (-) 1.99
Maintenance
Operation 64357.73 840.85 65198.58 58305.20 (-) 6893.38 (-) 10.57
Staff Welfare,
Retirement Benefits 40382.13 731.83 41113.96 39873.27 (-) 1240.69 (-) 3.02
and Miscellaneous
Railway Funds and
Payment to General 50613.74 2853.85 53467.59 53853.49 (+) 385.90 (+) 0.72
Revenues

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The main reasons for variations with reference to sanctioned provisions are as
under:
• Indian Railways Policy Formulation
Increase in expenditure towards staff cost and retirement benefits, more
expenditure under Mumbai Urban Transport Project (MUTP)
surcharge during the year.
• General Superintendence and Service on Railways
Reduction in expenditure towards staff cost, contingencies, leave
encashment, computer stationary, advertisement and publicity and
other expenses, less legal expenses, less drawl of stock from store and
low consumption of electricity during the year.
• Repairs and Maintenance
Reduction in expenditure towards salary and wages, staff cost,
materialization of less contractual payments, less expenditure on
procurement of non-stock items, less drawl of stores from stock, less
expenses on repair/contingent expenses/conservancy work, decrease in
Periodical Overhaul (POH), less adjustment of workshop debits, less
Passenger Reservation System (PRS) channels bills and miscellaneous
expenses than anticipated.
• Operation
Reduction in expenditure towards staff cost, less materialization of
contractual obligations, less drawl of lubricants and consumable stores
from stock, less expenses on Annual Maintenance Contract (AMC)
pertaining to Freight Operating Information System (FOIS) and Parcel
Management System, less expenses towards freight and handling
charges, sales tax/excise duty and value added tax (VAT) and decrease
in average rate of oil purchased during the year, than anticipated.
• Staff Welfare, Retirement Benefits and Miscellaneous
Reduction in expenditure due to less receipt of claims for
reimbursement of tuition fees, less receipt of bills for medicines, less
direct purchases, less expenditure towards staff cost, less drawl of
stores from stock, less materialisation of contractual obligations, less
purchase of medicines, less adjustment relating to Railway Protection
Force, Railway Protection Special Force, Government Railway Police
less adjustment of debits pertaining to territorial army, less receipt of
debits from pension disbursing authorities, less expenses towards
commutation of pension and ex-gratia pension, finalisation of less
number of death cum retirement gratuity cases and less expenses
towards deposit linked insurance scheme during the year, than
anticipated.

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• Railway Funds and Payment to General Revenues

Excess in expenditure under appropriation of funds due to availability
of higher surplus by end of the year than anticipated.
Grant wise authorisation and expenditure under the revenue and capital grants
and appropriations are detailed in Appendix-2.1.
Analysis of capital grant is discussed in paragraph 2.2.4 and 2.6.

2.2 Financial Accountability and Budget Management

2.2.1 Excess over Budget Provision

Table 2.4 gives the grants and appropriations wherein expenditure was
incurred in excess of authorized expenditure during 2014-15.
Table 2.4 Excess Expenditure (2014-15)
(` in crore)
Grant No. Particulars Original Supplementary Actual Excess
Provision provision Expenditure
Revenue-Voted
2 Miscellaneous Expenditure
(General) 831.45 0.00 901.52 70.07
14 Appropriation to Funds-
Depreciation Reserve Fund,
Development Fund, Pension 41478.74 2814.72 44679.94 386.48
Fund, Capital Fund, Debt
Service Fund
Capital-Voted
16 Railway Safety Fund
2198.00 1.90 2233.03 33.13

Total-Voted-Revenue and
44508.19 2816.62 47814.49 489.68
Capital
Appropriation Revenue-Charged
No.
Working Expenses –
3 General Superintendence 0.00 1.3733 1.3757 0.0024
and Services
Working Expenses –
7 Repairs and Maintenance of 0.00 0.0315 0.4962 0.4647
Plant and Equipment
Working Expenses –
Provident Fund, Pension
13 0.555 0.1013 0.8665 0.2102
and Other Retirement
Benefits
Total- Revenue-Charged 0.555 1.5061 2.7384 0.6773
Grand Total 44508.7450 2818.1261 47817.2284 490.3573

For the above mentioned grants and appropriations where excess expenditure
occurred, supplementary provisions were obtained in all except in one grant
and Grant No. 2- Miscellaneous expenditure -General. In Appropriation No.3-
Working Expenses- General Superintendence and Services and Appropriation

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No.7-Working Expenses-Repair and Maintenance of Plant and Equipment,

expenditure was incurred without obtaining original provision which indicated
poor budgetary forecasting.
• Excess in Revenue Grants and Appropriations
The reason for excess expenditure during 2014-15 were attributed to more
expenditure towards staff cost and retirement benefits, more expenditure under
MUTP surcharge, more expenditure in appropriations of funds due to
availability of higher surplus and materialization of more decretal payments,
than anticipated.
• Excess in Grant No. 16-Railway Safety Fund
The main reason of excess expenditure in Railway Safety Fund (RSF)
expenditure was due to more progress of work, materialisation of more
contractual payments and adjustment of more store bills etc.
Public Accounts Committee (PAC) in its Nineteenth Report (16th Lok Sabha)
on ‘Excess over Voted Grants and Charged Appropriations (2012-13) had
expressed their concern that excess expenditure has become a recurring
phenomena and recommended that the MoR should evolve a mechanism to
assess and project realistic requirement of funds both at Budgetary and
Supplementary stages so that timely action is taken to ensure that the excess
expenditure could be avoided as far as possible. In reply to the PAC’s
recommendation, MoR stated, in 2014-15 a Virtual Private Network (VPN)
enabled Rail Budget System connecting all Zonal Railways and Production
Units across IR would be implemented. This connectivity has reduced the
excess expenditure in 2014-15. The observation of the Committee is noted for
being more careful in future.
In spite of the above assurance given by the MoR to the PAC on their concern
over excess expenditure, MoR incurred excess expenditure of ` 490.37 crore
in the year 2014-15. It can be seen in Table 2.5, the expenditure has been
decreased in comparison to the excess expenditure incurred during the year
2012-13 and 2013-14. MoR has applied the mechanism of budgetary control
during 2014-15 and succeeded to some extent. However, MoR may adopt
more effective budgetary control mechanism to arrest the practise of booking
of expenditure beyond authorisation given by the Parliament. Table 2.5 shows
the number of instances and amount involved in excess expenditure for the last
three years:
Table 2.5 Excess Expenditure during the last three years
(` in crore)
Year No. of No. of Original Supplementary Actual Excess Growth
Voted Charged Provision Provision Expenditure rate in
Grant Appropriation percent
2012-13 3 7 47,829.04 2,338.95 51,838.23 1,670.24 59.35
2013-14 7 12 1,47,178.58 7,148.26 1,57,046.59 2,719.75 62.84
2014-15 3 3 44,508.75 2,818.12 47,817.24 490.37 (-)81.97

MoR in their Action Taken Note (ATN) on Chapter 2 of the Audit Report No.
19 of 2014 mentioned that all the Zonal Railways have been cautioned to

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assess their requirement scrupulously on a realistic basis at all budgetary

stages so as to control the expenditure within the sanctioned grants. MoR
needs to ensure implementation of its instructions by all the Zonal Railways.
The excesses over the budgetary sanctions require regularization by the
Parliament under Article 115(1) (b) of the Constitution of India.
2.2.2 Persistent Excess Expenditure
There were persistent excess during 2010-11 to 2014-15 in the Appropriation
No. 3 (Charged) - Working Expenses-General Superintendence and Services
as shown in the Table 2.6.
Table 2.6 Persistent Excess Expenditure
(` in crore)
Name and Grant No. Financial Original Supplementary Actual Excess
Year Provision provision Expenditure
Appropriation No. 3 2010-11 0.05 0.10 0.36 0.21
(Charged) – Working
2011-12 0.00 0.03 0.30 0.27
Expenses- General
Superintendence and 2012-13 0.00 0.01 0.43 0.42
Services
2013-14 0.00 0.50 0.88 0.38
2014-15 0.00 1.373 1.376 0.003

Reasons for excess were mainly attributed to materialization of more decretal

payments, than anticipated.
The persistent excess during last five years indicates the failure of IR to
accurately estimate budgetary requirements in order to enforce financial
discipline.

2.2.3 Savings

There were aggregate savings (revenue and capital grants) of ` 14,412.45

crore during the year 2014-15. In 11 cases, as detailed in Table 2.7, the
savings exceeded ` 100 crore.
Table 2.7: Savings over `100 crore
(` in crore)
Grant Original Supplementary Actual
Particulars Saving
No. Provision provision Expenditure
3 Working Expenses – 6472.70 0.00 6105.78 (-) 366.92
General
Superintendence and
Services
4 Working Expenses – 10267.93 136.06 10280.52 (-)123.47
Repairs and
Maintenance of
Permanent Way and
Works
5 Working Expenses – 4665.64 255.07 4782.70 (-) 138.01
Repairs and
Maintenance of
Motive Power
7 Working Expenses – 6228.19 112.77 6026.01 (-) 314.95

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Repairs and
Maintenance of Plant
and Equipment
9 Operating Expenses- 19713.11 0.00 19074.47 (-) 638.64
Traffic
10 Operating Expenses- 35181.17 0.00 29025.32 (-) 6155.85
Fuel
11 Staff Welfare and 5111.38 65.83 5016.46 (-) 160.75
Amenities
12 Miscellaneous 5338.77 315.82 5106.28 (-) 548.31
Working Expenses
13 Provident Fund, 29792.70 350.00 29635.76 (-)506.94
Pension and Other
Retirement Benefits
16 Capital 79272.06 0.00 73684.47 (-) 5587.59
16 Railway Funds 17095.30 465.65 17391.12 (-)169.83
Reasons for savings were attributed to less expenditure towards staff cost,
salary and wages, contingencies, leave encashment, computer stationary,
advertisement and publicity, less legal expenses, less debits from pension
disbursing authorities, less expenditure towards commutation of pension, ex-
gratia pension, finalization of less number of death cum retirement gratuity
cases, less expenditure towards Deposit Linked Insurance Scheme,
materialization of less contractual payments, less expenditure on procurement
of non-stock items, less drawl of stock from store, decrease in Periodical
Overhaul (POH) activity, less adjustments of workshop debits, less Passenger
Reservation System (PRS) channels bills, less expenditure on Annual
Maintenance Contract (AMC) pertaining to Freight Operating Information
System (FOIS) and Parcel Management System (PMS), less consumption of
High Speed Diesel (HSD) OIL, decrease in average rate of oil purchased, less
requirement of fund under diesel traction, decrease in rate of energy purchased
from outside source, less expenditure on repair of medical equipments, non-
filling up of vacancies, less payment of leasing charges other than IRFC, less
receipt of claims for reimbursement of tuition fees, less receipt of bills for
medicines, less direct purchases, less adjustment relating to Railway
Protection Force, Railway Protection Special Force, Government Railway
Police, less adjustment of debits pertaining to territorial army and less
miscellaneous expenses during the year than anticipated.
Grant No. 16 – Capital and Railway Funds – Reasons for savings under this
grant are given in succeeding para.
2.2.4 Persistent Savings
There were persistent savings of over ` 100 crore in following grant for the
last seven years ending 2014-15 as shown in the Table 2.8.
Table 2.8 Persistent Savings
(` in crore)
Particulars/Year
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Grant No. 16-
1,723.38 2,815.59 861.94 3,565.24 8,217.50 4,788.64 169.83
Railway Funds

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Reasons for savings in Capital Grant No.16-Railway Funds are as under:

• Savings in Grant No.16 - Railway Funds
Savings due to slow progress of works and less debits of stores, less
contractual payments, decrease in activities under construction/acquisition of
Rolling Stock and due to less materialisation of decretal payments than
anticipated.
• Savings in Grant No. 16 – Capital
Savings due to delay in land acquisition, delay in execution of work, slow
progress/nil progress of work and receipt of less debit, less/non finalisation of
tenders, less payments towards contractual liability, less booking of
expenditure and pending approval of work after sanction at RB’s level and due
to less materialisation of decretal payments than anticipated.
From the above, it may be seen that there has been continuous savings in
Grant No.16-Railway Funds from the years 2008-09 to 2014-15 and Grant No.
16 – Capital from 2007-08 to 2012-1326 and in 2014-15.
MoR needs to assess the funds requirements accurately and monitor the
progress of the works closely so that the allotted funds could be utilised
properly.

2.3 Supplementary Provisions

2.3.1 Revenue Grants and Appropriations

Supplementary provisions amounting to ` 5342.28 crore were taken during

2014-15 in ten revenue voted grants (Grant nos. 4,5,6,7,8,11,12,13,14 and 15).
These were obtained on account of higher payment of Dearness Allowance,
Kilometerage Allowance, Transport Allowance, Electric Traction, for meeting
the increased pensionery charges. Similarly, the supplementary provisions
under charged appropriation amounting to ` 4.43 crore were obtained during
2014-15 in eight appropriations (Appropriation number 3,4,5,7,8,9,11 and 13)
on account of more payments in satisfaction of court decrees and additional
requirement on account of revision of the establishment charges of audit.

2.3.2 Capital Grant and Appropriation

The Supplementary provision of ` 467.55 crore was taken during 2014-15 in

Grant No. 16 (Railway Safety Fund and Railway Funds) under ‘Voted’ to
meet additional requirements for the works.

26
Para 2.2.4 of Report No. 19 of 2014- Union Government (Railways) – Railways Finances.

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The Supplementary provisions of ` 57.23 crore was obtained under charged

appropriations (Grant No.16-Capital) during 2014-15 for payment in
satisfaction of court decrees and arbitration awards not anticipated earlier.
However, the assessment of supplementary provisions under voted and
charged appropriations were not realistic as there were savings of ` 5,724.29
crore and ` 28.82 crore respectively.

2.4 Surrenders

Savings in a grant or appropriation are required to be surrendered as soon as

these are foreseen without waiting for the end of financial year. There were
surrenders in a number of cases as shown in the Table 2.9:

Table 2.9 : Surrenders under various Grants

(` in crore)
Voted/ Net
Actual
Grant No. Charged Original Supplementary variation Surrender28
expenditure
(V/C) (Savings)27
1 V 278.01 0 266.81 (-)11.20 4.08
2 V 831.45 0 901.53 (+) 70.08 717.64
3 V 6472.70 0 6105.78 (-) 366.92 253.38
9 V 19713.11 0 19074.47 (-) 638.64 405.47
10 V 35181.17 0 29025.32 (-) 6155.85 5491.06
10 C 0.14 0 0 (-) 0.14 0.14
12 C 138.72 0 113.87 (-) 24.85 720.00
16 (Capital) C 111.95 57.23 143.91 (-) 25.27 1.14
16
V 17095.30 465.65 17391.12 (-) 169.83 145.04
(Railway Funds)
16
C 5.40 0 3.23 (-) 2.17 1.26
(Railway Funds)
16( RSF) C 2.00 0 0.63 (-) 1.37 1.78
It is evident from the above table; in one grant (Grant No. 12), the amount
surrendered exceeded the savings. In another one grant (Grant No. 2), the
amount was surrendered despite the excess expenditure under this grant.

2.5 Budgetary Control by Spending Units

Budget Estimates are usually calculated by IR after taking into account zonal
railways requirements which are analyzed and moderated Re-appropriation of
funds is done through Final Modification Statement29 (FMS). Rule 519 of
Indian Railway Financial Code (Volume-I) provides that control of
expenditure should be done through preparation in advance of estimates of the
expenditure to be incurred, the allotment of fund through budget grants for the

27
‘Savings’ represent the difference between the sanctioned grant and actual expenditure.
28
‘Surrender’ represents the difference between ‘Sanctioned Grant’ and ‘Final Grant’.
29
Final Modification Statement referred to final re-appropriation of fund from one unit to other or from
one work to other within the framework of rules. It is usually done at the fag end of the year.

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year on the basis of these estimates and continuous and concurrent review of
the expenditure as incurred against the details of the estimates and against the
sanctioned grants, so that revisions of estimates or re-appropriations of funds
are arranged for at the earliest.
Rules30 provide that Zonal Railways should furnish the statements showing the
additional allotments required (both voted and charged) or surrenders to be
made, during the current financial year under each head of appropriation, as
prescribed in the budget orders, and requiring the sanction of the President.
Based on the statements received from the zonal railways, RB prepares a Final
Modification Statement.
Audit reviewed all the 196 cases of re-appropriations relating to Grant
Accounts Nos. 3 to 13 of zonal railways. Summary of railway-wise grant
accounts is given in Appendix-2.2.
The following analysis revealed that the estimation of the final grants as a
result of FMS was defective:
• It was seen that in 46 cases, the actual expenditure exceeded the final
grant.
• In eight cases, the actual expenditure even exceeded the sanctioned grants
implying that surrender was not required in those cases.
• In 24 cases, zonal railways received additional funds through re-
appropriation at the fag end of the year though the actual expenditure was
less than the sanctioned grant.
Such instances indicate poor budgetary control and resulted in consequent
issue of injudicious re-appropriation orders.

2.6 In-depth Study of Grant No. 16-Assets, Acquisition, Construction

and Replacement

IR operates one Grant for capital expenditure. Grant No. 16 i.e. Works Grant
is the largest grant in terms of allocation and area of activities in the field. It
deals with expenditure on construction, acquisition and replacement of assets
of IR. This grant has four segments and draws its funding from four distinct
sources:
ƒ Capital-budgetary support advanced by General Budget of Government of
India (GoI),
ƒ Railway Funds-internal resources kept under three different reserves31,
ƒ Railway Safety Fund-financed by Railways’ share of diesel cess from
Central Road Fund, and

30
Para 385 and Para 386 of Indian Railway Financial Code-Volume-I
31
Reserves-Depreciation Reserve Fund (DRF), Development Fund (DF) and Capital Fund (CF).

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ƒ Open Line Works (Revenue)-new or additional

improvement/replacement works costing less than ` one lakh financed
from revenue.
Re-appropriation of funds from one segment to another is not permissible.
Segment wise allocation and expenditure is given below:
Table 2.10 Segment wise Expenditure under Grant No. 16
(` in crore)
Total
Original Supplementary Actual Saving (-)/
Particulars sanctioned
Provision provision Expenditure Excess (+)
provisions
Voted Portion
Capital 79,272.06 0.00 79,272.06 73,684.47 (-) 5,587.59
Railway Funds 17,095.30 465.65 17,560.95 17,391.12 (-) 169.83
Railway Safety Fund 2,198.00 1.90 2,199.90 2,233.03 (+) 33.13
Open Line Works – 0.00
0.00 0.00 0.00 0.00
Revenue
Total Voted 98,565.36 467.55 99,032.91 93,308.62 (-) 5724.29
Charged Portion
Capital 111.96 57.23 169.19 143.91 (-) 25.28
Railway Funds 5.40 0.00 5.40 3.23 (-) 2.17
Railway Safety Fund 2.00 0.00 2.00 0.63 (-) 1.37
Open Line Works –
0.00 0.00 0.00 0.00 0.00
Revenue
Total Charged 119.36 57.23 176.59 147.77 (-) 28.82

¾ Capital

In 2014-15, provision of ` 79,272.06 crore was made for acquisition and

construction of assets/rolling stocks etc. There was a net saving of ` 5,587.59
crore, against the sanctioned provision, in this segment of the grant. Reasons
for savings are discussed in Para 2.2.4.
¾ Railway Funds
Appropriation Accounts for ‘Railway Funds’ under Grant No. 16 is financed
through three sources of funds viz DRF, Development Fund (DF) and Capital
Fund (CF).
ƒ DRF-for replacement/renewal of existing assets (fund financed from
internal resources by charging to working expenses).
ƒ DF-for all passenger and other users, works including addition and
replacement, labour welfare works not exceeding ` one lakh each and
Safety Works (fund financed from net revenue surplus).
ƒ CF-for meeting requirement of capital expenditure on construction and
acquisition of new assets (fund financed from net revenue surplus).
All these funds are financed from the internal resources of IR either by
charging to ‘Working Expenses’ (DRF) or from ‘Net Revenue Surplus’ (DF
and CF). Thus, performance of IR and availability of balances in the fund
accounts impacts planning of expenditure under this segment of the grant.

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Source-wise break-up of sanctioned allocation and expenditure under Railway

Funds is tabulated in Table 2.11.
Table-2.11-Component of Railway Funds
(` in crore)
Total
Original Supplementary Actual Saving (-)/
Particulars sanctioned
Provision provision Expenditure Excess (+)
provisions
A - Voted Portion
DRF 8771.80 426.72 9,198.52 9,328.18 (+) 129.66
DF 2,861.50 38.93 2,900.43 2,613.70 (-) 286.73
CF 5,462.00 0.00 5,462.00 5,449.24 (-) 12.76
Total Voted 17,095.30 465.65 17,560.95 17,391.12 (-) 169.83
B - Charged Portion
DRF 4.20 0.00 4.20 2.14 (-) 2.06
DF 1.20 0.00 1.20 1.08 (-) 0.12
CF 0.00 0.00 0.00 0.00 0.00
Total Charged 5.40 0.00 5.40 3.22 (-) 2.18
Grand Total – (A+B) 17100.70 465.65 17566.35 17394.34 (-) 172.01

Analysis of this segment of grant revealed that there were net savings (under
voted) of ` 169.83 crore (0.96 per cent of the sanctioned grant).
Further examination of source wise allocation and expenditure under voted
portion of funds revealed the following:
¾ There was an excess of ` 129.66 crore constituting 1.41 per cent of the
sanctioned provisions under DRF.
¾ There were savings of ` 286.73 crore constituting 9.89 per cent of the
sanctioned provisions under DF.
¾ There were savings of ` 12.76 crore constituting 0.23 per cent of the
sanctioned provision under CF.
• Railway Safety Fund
This source of capital expenditure is funded by IR’s share of diesel cess in
Central Road Fund. Available fund is utilized for road safety works like
manning of un-manned railway crossing and construction of road over/under
bridges. There was an excess expenditure of ` 33.13 crore against sanctioned
grant of ` 2,199.90 crore constituting 1.51 per cent during 2014-15.
• Open Line Works (Revenue)
This segment of the grant was financed from the revenue of IR. Cost of all
works (other than passenger amenities works) whether new or additional
improvement/replacement, where cost is less than ` one lakh, is chargeable to
this segment of grant. During 2014-15, no fund was allocated under this
segment of the grant.

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2.6.1 Withdrawal/Utilization of Funds

The Table below depicts the status of Budget Estimate and Actual with regard
to ‘Appropriation to funds’ and ‘Amount utilized’ from the funds during the
last three years:
Table 2.12-Appropriation to Railway Funds and withdrawal there from during
the last three years ended 31 March 2015
(` in crore)
Fund Particulars 2012-13 2013-14 2014-15
DRF Appropriation to Fund (BE) 9,700.00 7,700.00 7,050.00
Appropriation to Fund (Actual) 7,050.00 8,100.00 7,975.00
Excess (+)/Short (-) Appropriation (-)2,650.00 400.00 925.00
Expenditure/withdrawal from fund 7,045.47 7,119.91 7,286.93
DF Appropriation to Fund (BE) 10,557.00 3,550.00 300.00
Appropriation to Fund (Actual) 7,815.00 3,075.00 1,374.93
Excess (+)/Short (-) Appropriation (-)2,742.00 (-) 475.00 1,074.93
Expenditure/withdrawal from fund 2,457.82 2,561.43 2,644.07
CF Appropriation to Fund (BE) 5,000.00 5,433.80 5,662.74
Appropriation to Fund (Actual) 451.25 500.00 6,233.36
Excess (+)/Short (-) Appropriation (-)4,548.75 (-) 4,933.80 570.62
Expenditure/withdrawal from fund 0 0 5,449.24
Total Appropriation to Fund (BE) 25,257.00 16,683.80 13,012.74
(Railway Appropriation to Fund (Actual) 15,316.25 11,675.00 15,583.29
Funds) Excess (+)/Short (-) Appropriation (-) 9,940.75 (-) 5,008.80 2,570.55
Expenditure/withdrawal from fund 9,503.29 9,681.34 15,347.24

From the above, it is seen that the appropriations under DF and CF was made
in excess of the budget estimate due to availability to net revenue surplus.
Appropriation of fund under DRF exceeded by 13.12 per cent of the Budget
estimate.
2.6.2 Re-appropriation within Grant No. 16

Works/activities under each segment of the grant were grouped under 33 Plan
Heads (Minor Heads of Account) like Construction of New Lines, Doubling,
Gauge Conversion, Rolling Stock etc. Investment decisions which form the
budget estimates for construction, acquisition and replacement of assets
(Works Budget) were processed through the annual "Work, Machinery and
Rolling Stock Programme" prepared on the basis of advance and continuous
planning process.
Despite detailed exercise in formulation of Works Budget of Capital Grant,
non-utilization of sanctioned grant (as tabulated in Table No.2.10) besides
large scale re-appropriation of original allocated funds had been noticed.
Some of the cases of re-appropriation of funds are given in the Table 2.13.

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Table 2.13-Re-appropriation of funds in Grant No. 16

Source of Fund Plan Head No. and Name (+) Re-appropriation
through additional fund/
(-) Re-appropriation
through non-
utilization/surrender of
fund (` in crore)
Capital 1500 (Voted) – Doubling (+) 670.82 (19.77)
1100 (Voted) - New Line Construction (-)88.34 (1.24)
Capital
Capital 1400 (Voted) – Gauge Conversion (+) 1,238.71 (51.46)
Capital 1400 (Charged) – Gauge Conversion (-) 9.10 (59.51)
Capital 4200 (Voted) – Workshop including production unit (-) 53.21 (3.93)
Capital 1700 (Voted) – Computerization (-) 28.99 (19.20)
Capital 2100 (Voted) – Rolling Stock (+) 2649.97 (147.88)
Capital 2100 (Charged)- Rolling Stock (-)8.00 (100)
Railway Funds 1500 (Voted) – Doubling (-)18.54 (74.16)

Railway Funds 1600 (Voted) – Traffic Facilities – yard remodeling (-) 29.79 (5.64)
and others
Railway Funds 1700 (Voted) – Computerization (-)20.46 (10.87)
Railway Funds 2100- (Voted)- Rolling Stock (-) 139.30 (6.89)

Railway Funds 5300 (Voted) – Passenger Amenities and Other (-)87.57 (8.54)
Railway user’s Amenities
Railway Safety 2900 (Voted) – Road Safety Work – Level Crossings (+) 16.96 (4.10)
Fund

Note-Figures in bracket represent percentage to the sanctioned grant

Large scale changes in priorities and re-appropriation of originally allocated

resources from one plan head to another were indicative of the lack of
reliability in preparation of budgetary estimates for assets acquisition,
construction and replacement/renewal. This affected the long term advance
planning of construction and acquisition of assets and also schedules of
completion of works/projects.
To sum up, analysis of the Capital Grant (No. 16) revealed:
• Inadequate planning
• Weak links between policy making, planning and budgeting
• Inadequate relationship between budget as formulated and budget as
executed.
2.7 Defects in Budgeting
A large number of instances of defective budgeting resulting in excess/savings
beyond the prescribed limits32 were noticed. North Central (49 cases), West
Central (27 cases), Southern (23 cases), South Eastern (16 cases), North
Western and South Western (12 cases each) and Western (10 cases) were the
railways with most number of cases on defective budgeting. A few instances
of defects in budgeting are given in the Table 2.14.

32
Paragraph 409 and 410 of Indian Railway Financial Code (Volume-I) prescribed limit for permissible
variations which is 5 per cent or ` 50 lakh whichever is less and for Grant No.16 it is 10 per cent or
` 100 lakh whichever is less.

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Revised copy of the Annexure K, containing cases of defects in budgeting was

not furnished by MoR.
Table 2.14-Cases of Defects in Budgeting

Zonal Grant No./Name Minor Head/Plan Head Excess/ ` in Percentage

Railway Short crore w.r.t Final
(Voted ) Provision Grant

NCR 08-Operating Expenses- 300-Electric Loco Short 21.23 6.85

Rolling Stock and
Equipment
NCR 11-Staff Welfare and 600-Residential and Short 6.02 14.68
Amenities welfare Buildings-Repair
and Maintenance
NCR 12-Miscellaneous Working 100-Security Excess 24.22 11.33
Expenses
NCR 12-Miscellaneous Working Suspense-Miscellaneous Short 6.03 82.89
Expenses Advance Revenue
NWR 13-Provident Fund, Pension 690-Exgratia payments Excess 2.14 25.16
and other Retirement to families of CPF
Benefits retirees
WR 07-Revenue-Repair and 800-Other Plant and Excess 15.63 54.80
Maintenance of Plant and Equipment
Equipment
WR 12-Revenue-Miscellaneous Miscellaneous Advance Short 8.24 22.02
Working Expenses (Revenue)
WCR 02-Mioscellaneous Railway Recruitment Short 1.64 98.71
Expenditure (General) Board-Bhopal
WCR 05-Repair and Maintenance- 300-Diesel Locomotives Excess 20.28 9.93
Motive Power
NCR 16-Capital 1500-Doubling Excess 3.57 18.40
NCR 6400-Other Specified Excess 6.56 79.20
16-Capital Works
NWR 16-Capital 5100-Staff Quarters Excess 1.62 33.31
NWR 16-DRF 3200-Bridge Works Excess 2.05 15.69
WR 16-DF 3300-Signalling and Excess 5.84 16.49
Telecommunication
WCR 16-Capital 1600-Traffic Facilities Excess 2.78 15.67
WCR 16-Capital 4200-Workshop and Excess 1.71 24.65
Production Units
ICF 16-Capital 7100-Stores Suspense Excess 4.43 16.41

ICF 16-DRF 4100-Machinary and Short 3.12 13.71

Plant

IR need to take a comprehensive relook at its budgeting process and make the
projections more realistic, so as to ensure that funds are fully utilised for the
purposes sanctioned by the Parliament.

2.8 Misclassification of Expenditure

Instances of misclassification of expenditure and other accounting mistakes

had been noticed while verifying the Accounts of the Zonal Railways. Cases

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of misclassification of expenditure and important accounting mistakes have

been listed in the “Appropriation Accounts of IR 2014-15-Detailed Accounts-
Part II. These cases included misclassification of expenditure from one
revenue grant to another and also from revenue to capital grant and vice-versa.
Cases on misclassification of expenditure from capital to deposit heads of
accounts were also identified in audit. Misclassification of expenditure from
revenue to capital head of accounts or capital to deposit heads understated the
revenue and capital expenditure in the accounts.
The revised Annexure-J, containing cases of such misclassifications was not
furnished by the MoR.
Some instances of misclassification of expenditure and receipts by the Zonal
Railways during 2014-15 are mentioned below:
• Mis-classification between Revenue expenditure and Capital
expenditure
(i) In SR, an expenditure amounting to ` 6.86 crore was
debited to Revenue Grant No. 12-Miscellaneous Working
Expenses instead of Capital Grant No. 16-Capital (` 4.39
crore) and Store Suspense (` 2.47 crore).
(ii) In SR, an expenditure of ` 0.16 crore pertaining to the
engine hire charges and Establishment Charges (Work
charged Post) was debited partly to Revenue Grants 03-
General Superintendence and Services on Railways and
Grant No. 04-Repair and Maintenance of Permanent Way
and Works instead of Capital Grant No. 16-DRF.
(iii) In NCR, an expenditure of ` 1.21 crore towards cost of
equipments was debited to the Revenue Grant No. 07-
Repair and Maintenance of Plant and Machinery instead of
Capital Grant No. 16-Capital.
(iv) In SWR, an expenditure of ` 1.07 crore towards
improvement and strengthening of Bridges was debited to
the Revenue Grant No. 04-Repair and Maintenance instead
of Capital Grant No. 16-DF-3.
(v) In NR, an amount of ` 0.67 crore towards cost of
Permanent Way Material was debited to the Revenue Grant
No. 04-Repair and Maintenance of Permanent Way and
Works instead of Capital Grant No. 16-DRF-Track
Renewal.
(vi) In NR, an expenditure of ` 0.29 crore towards Closed User
Groups (CUG) bills was debited to the Capital Grant No.
16-DRF instead of Revenue Grant No. 07-Repair and
Maintenance of Plants and Equipments.
• Mis-classification of expenditure under Revenue Grants
(i) In NWR, an expenditure of ` 2.15 crore towards water
supply charges was debited to the Revenue Grant No. 12-
Miscellaneous Working Expenses instead of Revenue
Grants No. 04-Repair and Maintenance of Permanent Way

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and Works (` 0.86 crore) and Grant No.11-Staff Welfare

and Amenities (` 1.29 crore).
(ii) In SWR, an expenditure of ` 0.64 crore towards Ex-gratia
compensation paid to deceased railway employee was
debited to Revenue Grant No. 12-Miscellaneous Working
Expenses instead of Revenue Grant No. 13-Provdent Fund,
Pension and other retirement benefits.
(iii) In NR, an expenditure of ` 0.24 crore towards cost of staff
was debited to the Revenue Grant No. 03-General
Superintendence and Services on Railways instead of
Revenue Grant No. 07-Repairs and Maintenance of Plants
and equipments.
(iv) In NR, an expenditure of ` 1.15 crore towards cost of
maintenance staff of Permanent Way works was debited to
Revenue Grant No. 09-Operating expenses-Traffic instead
of Revenue Grant No. 04-Repair and Maintenance of
Permanent Way and works.
(v) In NR, an expenditure of ` 0.30 crore towards pay and
allowances during training of Non-gazetted staff was
debited to the Revenue Grant No. 04-Repair and
Maintenance of Permanent Way and Works instead of
Revenue Grant No. 12-Miscellaneous working expenses.
(vi) In NR, an expenditure of ` 0.02 crore towards stipend paid
to the apprentices was debited to the Revenue Grant No.
06-Repair and Maintenance of Carriage and Wagon instead
of Revenue Grant No.12-Miscellaneous Working Expenses.
(vii) In SER, an expenditure of ` 2.59 crore towards Pay and
Allowances of the Gate Keepers was debited to the
Revenue Grant No. 4-Repair and Maintenance of
Permanent Way and Works instead of Revenue Grant No.
9-Operating expenses-Traffic.
• Mis-classification of expenditure under Capital Grant
(i) In SR, an expenditure of ` 2.83 crore towards improvement
of Running room and extension of Platform was debited to
Capital Grant No. 16-DRF instead of 16-DF.
(ii) In NCR, an expenditure of ` 0.74 crore towards cost of
Diesel Generator Set was debited to Capital Grant No. 16-
DRF instead of 16-DF.
(iii) In SWR, an expenditure of ` 281.48 crore towards works
pertaining to the State Governments was debited to the
Capital Grant No.16-Capital instead of Deposit
Miscellaneous.
(iv) In WR, an expenditure of ` 0.11 crore towards Construction
of multilevel Road Over Bridge (ROB) in lieu of Level
crossings was debited to Capital Grant No. 16-DF instead
of 16-RSF.

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(v) In NR, an expenditure of ` 47.82 crore towards cost of

Permanent Way material received from Track Depot was
directly debited to the Capital Grant No. 16-DRF instead of
Store Suspense.
• Mis-classification of receipts
(i) In ECoR, an amount of ` 1.71 crore relating to halt
commission was debited to the Station earnings instead of
Grant No. 09-Operating Expenses-Traffic.
(ii) In NCR, an amount of ` 0.19 crore towards penalties
recovered from passengers was debited to Earnings
Abstract Z-Sundry Earnings instead of Abstract X-
Coaching.
(iii) In SWR, an amount of ` 29.08 crore towards Service Tax
collected from passengers was credited to the Earning
Abstract Z-650-Sundry Earnings instead of CENVAT
Credit 044-Service Tax.
The PAC in its Nineteenth Report (16th Lok Sabha) observed that “The
Committee are distressed to find despite their repeated exhortations, the
Ministry of Railways have not been able to stop misclassification of
expenditure in their future accounts.” Committee further stated that “It seems
that no tangible action has been taken by the Ministry of Railways either to fix
the responsibility against the responsible officers for such glaring mistakes or
to revamp their existing accounting system as had been repeatedly
recommended by the PAC. The Committee took a serious view of such callous
approach on the part of the Ministry of Railways for not timely detecting such
mistakes which led to derail the budgetary exercise. As major function of
Accounts Department of Ministry of Railways are stated to be computerised
with several applications to strengthen the various accounting activities, the
Committee hope that the Ministry would now be able to overcome systemic
lacunae/loopholes and progressive elimination of the misclassification
syndrome in future”.

MoR in its reply stated that the PAC’s recommendations are noted for strict
compliance. Apart from fixing responsibility for lapses at suitable levels MoR
is committed for computerisation at various accounting activities to bring
about efficiency and expediency in its functioning. It shall always remain the
endeavour of MoR to avoid misclassification/mistakes altogether. Despite
PAC’s remarks on misclassification, the instances of misclassification were
noticed during 2014-15 also. Further, MoR in its ATN on Chapter 2 of the
Audit Report No. 19 of 2014 mentioned that instructions have been reiterated
to the Zonal Railways for strengthening/tightening the system and sensitize the
staff to avoid misclassifications while booking expenditure, besides enforcing
accountability for correctness of allocation of expenditure by taking up
defaulting staff appropriately.

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Despite issue of repeated instructions by the MoR, instances of

misclassification have again been noticed in 2014-15. Implementation of the
instructions needs to be ensured by MoR.

2.9 Unsanctioned Expenditure

All items of irregular expenditure incurred by IR, such as expenditure incurred

in excess of sanctioned estimates, expenditure incurred without detailed
estimates and miscellaneous overpayments etc. are noted in books of
objectionable items (OIB) by the zonal railways administration and treated as
unsanctioned expenditure.
Diagram-2.3 Unsanctioned Expenditure (cumulative figures)

A review of such expenditure held under objection disclosed an increasing

trend ` 6,272 crore (March 2011), ` 7,354 crore (March 2012), ` 8,082 crore
(March 2013), ` 10,685 crore (March 2014) and ` 12,095 crore (March 2015).
Unsanctioned expenditure as of 31 March 2015, included ` 6,240 crore
(51.59 per cent of total unsanctioned expenditure) related to items which were
more than two years old. MoR needs to strengthen the control mechanism
and ensure that all the unsanctioned exependiture is regularised on prioirty
basis.
2.10 Conclusions

The Appropriation Accounts reflects the comparison of the actual expenditure

with the amount of grants voted by the Parliament and appropriations
sanctioned by the President. Article 114 (3) of the Constitution provides that
no money be withdrawn from the Consolidated Fund of India except under
appropriations made by law passed in accordance with the provisions of the
Article. Further, General Financial Rules 52(3) stipulates that no
disbursements be made which might have the effect of exceeding the total
grant or appropriations authorised by the Parliament for a financial year except

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after obtaining a supplementary grant or an advance from the Contingency

Fund.

During 2014-15, Ministry of Railways against the sanctioned grant (Original

and Supplementary Grant) of ` 2,99,600.02 crore in respect of 15 Revenue
Grants and one Capital Grant, incurred an expenditure of ` 2,85,133.21 crore
thereby registering a net savings of ` 14,466.81 crore. An analysis of grant-
wise expenditure revealed that the net saving of ` 14,466.81 crore was a result
of savings of ` 14,957.18 crore under 13 revenue grants, two segments of
capital grant, eight revenue appropriation and three segments of capital
appropriation, adjusted by an excess of ` 490.37 crore in two revenue grants,
three revenue appropriations and one segment of capital grant.

The savings in the Revenue Grants and Capital Grant indicate that the core
activities, creations of assets, value addition for which the funds were
demanded through Demands for Grants were not done and the desired benefits
could not be achieved by the Railways. At the same time, incurring of excess
expenditure over the sanctioned grants indicates that the unauthorised
expenditure incurred without the same voted by the Parliament/President’s
sanction.

Instances of persistent excess expenditure, persistent savings, re-

appropriations of funds, surrender of funds, incorrect assessment of demands
for supplementary grants, misclassification of expenditure from Revenue
Grant to Capital Grant and vice versa, one revenue grant to another,
unsanctioned expenditure remained un-regularised by the competent authority
etc have regularly been pointed out by Audit.

The PAC, time and again expressed their strong displeasure on budgeting and
recommended that the Ministry of Railways should evolve a mechanism to
assess and project realistic requirement of funds both at Budgetary and
Supplementary stages so that timely action is taken to avoid the excess
expenditure as far as possible. However, despite recommendations of the
PAC, the realistic Budget projection could not be made by the Ministry of
Railways.

The cases of misclassification of expenditure have been a regular feature in the

accounts of IR. The PAC observed that a large number of cases of
misclassification of expenditure under various Grants/Appropriations operated
by Ministry of Railways have turned out to be a recurring phenomenon. The
Committee recommended that the existing budgetary mechanism in Railways
needs to be revamped to overcome systemic lacunae/loopholes and progressive
elimination of misclassification syndrome and responsibility fixed on the
persons responsible for the apparent lapses.
However, no concerted efforts have been taken by the Ministry of Railways to
curb/eliminate the instances of misclassification of expenditure by the spending
units.

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2.11 Recommendations

¾ Ministry of Railways needs to strengthen the process of budgetary

estimation so that the supplementary demands for grants do not
remain unutilised or become short of the requirement. Cases of
defects in budgeting need to be analysed and measures taken to avoid
recurrence in future.
¾ Ministry of Railways should impress upon the budget controlling
authorities for regular monitoring of the flow of expenditure and
budget allotment and take prompt action for seeking additional
funds/surrender of funds allotted could be judicially utilized for the
intended purposes.
¾ Internal control mechanism should be strengthened to reduce the
instances of misclassification of expenditure. Deterrent sanctions
should be put in place to foster greater responsibility and
accountability at the level of key controlling officers.
¾ The unsanctioned expenditure should be controlled; administration
should ensure all unsanctioned expenditure is regularised on
priority.

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