NEW DELHI: With a chartered accountant, Suresh Prabhu, at the helm, the
railways is introducing an online system for tracking cost and output
creation at divisional level for better financial management and
reporting that will usher in more transparency and efficiency in the
system.
To be called Performance and Activity Based Unit Costing, the process is expected to produce an
outcome budget for the railways where it will be able to analyze stepwise costing of every asset created and services delivered.
It will also deliver train, section and rail route costing and profitability analyzes. "We need to bring in cost control targets. For better financial management, there's a need to arrive at per-unit cost of service provided or output delivered," a senior government official said.
The railways has 16 divisions that undertake all asset creation as well as operational and management work, but there is no centralized cost-tracking system.
The railways is also proposing to set up an internal audit branch at every divisional headquarters. "If you need more investment to come or to bring in corporatization, the only way is to introduce activity-based unit costing. That's the only way investors will get more confidence after they see the actual results and numbers," said Jaijit Bhattacharya, partner-infrastructure at consultancy firm KPMG.
The existing budget system comprises comparison of expenditure incurred against the budget estimates without estimating the final outcomes achieved. The national transporter has roped in the Institute of Chartered Accountants of India (ICAI) to prepare a management information system (MIS) for the new system.
"It will lead to the elimination of the non-value adding, infructuous costs, wastages. Systemic efficiencies can also be identified for elimination in a planned way. It will also result in better operating ratio for the railways," the government official said. The railways currently has a highly unhealthy operating ratio - operating expenses as a percentage of revenue - at over 97%, which leaves it with little cash to undertake expansion and maintenance activities.
The pilot run for the project will be done in Northern Railway.
To be called Performance and Activity Based Unit Costing, the process is expected to produce an
outcome budget for the railways where it will be able to analyze stepwise costing of every asset created and services delivered.
It will also deliver train, section and rail route costing and profitability analyzes. "We need to bring in cost control targets. For better financial management, there's a need to arrive at per-unit cost of service provided or output delivered," a senior government official said.
The railways has 16 divisions that undertake all asset creation as well as operational and management work, but there is no centralized cost-tracking system.
The railways is also proposing to set up an internal audit branch at every divisional headquarters. "If you need more investment to come or to bring in corporatization, the only way is to introduce activity-based unit costing. That's the only way investors will get more confidence after they see the actual results and numbers," said Jaijit Bhattacharya, partner-infrastructure at consultancy firm KPMG.
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The existing budget system comprises comparison of expenditure incurred against the budget estimates without estimating the final outcomes achieved. The national transporter has roped in the Institute of Chartered Accountants of India (ICAI) to prepare a management information system (MIS) for the new system.
"It will lead to the elimination of the non-value adding, infructuous costs, wastages. Systemic efficiencies can also be identified for elimination in a planned way. It will also result in better operating ratio for the railways," the government official said. The railways currently has a highly unhealthy operating ratio - operating expenses as a percentage of revenue - at over 97%, which leaves it with little cash to undertake expansion and maintenance activities.
The pilot run for the project will be done in Northern Railway.
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