Indian Railway Codes and Manuals-Administration and Finance Code-Chapter- 8 (VIII)
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CHAPTER VIII OPERATIONAL AND FINANCIAL PLANNING 801. General—National Planning is a charter of orderly
progress. Its purpose is to organise efficient exploitation of the country's
resources to increase production, and to step up the tempo of economic
activity to the maximum extent possible. Planning provides a framework of
time and space that binds sectors and regions together and relates each
year's efforts to the succeeding years. 802. As a major transport industry, the Railways
play an important part in the economic progress of the
country by the transport of raw materials to and finished goods from key
industries, by the movement of food-grains from
agriculturally surplus areas to deficit areas, and by meeting the
vital transport needs of the country in other
spheres. The Railway plan is, therefore, a part of the
integrated plan for the development of the country and is
governed by the parameters, as well as the compulsions, of the national plan. 803. Railway planning is geared to the five-year planning
system adopted by the Government for national development as
a whole. Alternatives to the five-year Railway Plans are
made, when necessary, at the Government's mid-term review
and the railway's investment plans are reviewed annually by
the Railway Board. These processes suit the
circumstances of the Railways in the short term. However, it has to
be recognised that specific long term objectives need to be
set, so that a clear framework exists as a basis for five-year planning. 804. A fifteen-year Corporate Plan (1985-2000) has,
therefore, been prepared whose objectives are as under :-— (i) To provide rail transport for both passenger and goods
adequate to meet demand in areas where railway operation confers optimum
benefit to the economy, having due regard to the Government's policy of
development of backward areas ; (ii) To provide such rail transport at the lowest cost consistent
with— (a) requirements of the railway users and
safety of operation, (b) adequate provision for replacement of
assets and some provision for development of business, «nd (c) the least amount of pollution of the
environment. (iii) To work in association with or utilize other modes
of transportation, such as pipelines and road transport and to engage in
ancillary activities necessary to sub serve the above two objectives (iv) To establish a corporate image of the railways as
being an up-to-date business organization with the interests of the public
and of the nation as its prime objectives ; and (v) To develop organizationally effective personnel with
pride in their work and faith in the management. 805. Railway Planning Process—.The Railway's Planning
process, whether in building up the long-term plan or for the purpose of
forecasting the transport requirements for the five years plans, commences
with the task of— (a) forecasting the growth of passenger and
freight traffic area-wise, (b) identifying and removing bottlenecks in the
flow of traffic which may have already developed, (c) anticipating likely bottlenecks with the
future growth of traffic and to make timely
provision for execution of line capacity works, (d) working out the requirement of rolling
stock for the traffic anticipated at the end of the plan period, (e) assessing the programme of replacement of
over-aged assets keeping in view, at the same time, the importance
of import substitution so as to achieve self sufficiency, and (f) adopting the State-of-Art Technology to
keep pace the Technology up gradation. 806. The obvious first step is to arrive at a fairly well
modulated forecast of passenger and freight traffic. This is done under the
aegis of the Planning Commission by means of integrated studies conducted in
conjunction with various economic Ministries, Governmental and other agencies
concerned. 807. The Planning Commission initiates exercises well in
advance of the commencement of the Five Year Plan concerned. The modus
operandi is to appoint Steering Groups consisting of top level
representatives of the various Economic Ministries and the Planning
Commission. These, in turn, have Working Groups and Sub-Groups reporting to
the main functional Steering Group. Such Working Groups and Sub-Groups are
constituted to cover various facets of the Plan for example, assessment of
financial resources, conducting systems analysis, and study of mineral and
petroleum industries, Power, Coal and Lignite, Metallurgical industries, engineering
industries including transport equipment and agricultural machinery, power
generation, metallurgical, mining, fertilizer and chemical equipment,
iron-ore and the ferrous group of mineral etc. All these, in some way or the
other, effect rail freight forecasts, and have a Railway representative on
each of these Groups. 803. The main Steering Group in 'he Transport and
Communications Sector generally— (a) identifies areas in which working groups are required
to be set up to undertake 'in-depth' studies of parameters connected with
formulation of the Five Year Plans in the field of Transport and
Communication and broadly determines their scope of work and composition ; (b) provides broad guidelines to the Groups in their work,
and reviews progress from time-to-time; and (c) ensures necessary measure of
co-ordination between different related fields. 9. Each Ministry, in turn, sets up different Working
Groups under the aegis of the Planning Commission. The Ministry of Railways
are generally the conveners of the Working Groups on (a) Freight traffic projections ; (b) Passenger traffic projections ; and (c) Formulation of railway development
programmes. The Working Groups include representatives of the Economic
Ministries, and major industries in the Public Sector such as the BHEL,
RITES, the Fertilizer Corporation of India, the Indian Oil Corporation, the
National Mineral Development Corporation, the National Coal Development
Corporation, Deptt. of Coal, Central Electrical Authority, Department of
Steel, Department of Industrial Development; and representation of Ministries
of Dafence, Transport, Petroleum etc. Trend in freight Traffic—During the period 1950-51 to
1989-90, the Originating traffic on Indian Railways had grown by 270 per cent
in terms of tonnage and by 471 per cent in terms of transport output. The
growth of revenue earning traffic was 332 per cent and 549 per cent
respectively. 810. Freight traffic forecasts are generally sub-divided
into those for general goods, and bulk commodities such as, coal, finished
steel and raw materials for steel plants, food grains, mineral ores, iron and
steel, cement, petroleum products and fertilizers. The share of bulk
commodities in the total revenue earning traffic, reckoned in terms of
originating tonnage has been going up progressively (from 58.2 per cent in
1950-51 to 80.6 per cent on 1973-74). In respect of
general goads, the growth is anticipated on the basis of past trends. 811. In respect of bulk commodities, the information
furnished by the various Economic Ministries relates to their anticipated
production, the quantum of exports and imports, the detailed linkages between
sources of supply and consumer, destination, and the direction-wise
requirements of rail transport. The demand projections and the rail transport
requirements are then formulated commodity-wise for each of the major
commodities, and the anticipated originating tonnage arrived at. 812. One of the primary functions of the Railways
is to move goods traffic from one place to the other. The
Railways' workload has thus two distinctive elements, viz., the quantum of
traffic and the distance (i.e., lead) over which the traffic
moves. It has been customary to express freight traffic
targets in terms of originating tones.. A mare precise measure of
traffic would bathe net tone kilometer (NTKM) which takes into account both
weight and distance factors. However, there are
difficulties in regard to reliable estimation of future 'lead' of traffic,
because many forces act and react in producing transport service. 813. While the target for freight traffic on the
Railways has so far been expressed in terms of originating tonnage, the
anticipated net tonne kilometres are also worked out for the Plan
period. This exercise is carried our In two different
ways. Firstly, the future level of 'originating
tonnage'
and 'lead' is arrived at
on the basis of the past trends. In the alternative
exercise, detailed likely movements of selective bulk commodities like coal,
iron ore, cement, POL, fertilizer etc., which account for a dominant share of
the Railways' freight traffic, are traced from the likely or
known source to the various consumption paints on the basis of available
Information. Only the residual traffic in the second exercise is assessed on past trends. These alternative
a good cross check on each other for final forecasting of the transport
requirements. 814. The growth of passenger traffic is anticipated on
the basis of past trends, separately for suburban and non-suburban traffic.
In regard to non-suburban traffic, the extent of over-crowding existing at
present on long distance trains on trunk and other major routes is assessed.
In regard to suburban traffic, the studies conducted from time-to-time in
respect of population projections as also studies in connection with the
various Metropolitan Transport Schemes, are taken into account. With these
are also correlated the studies of national income and the growth of rail
passenger traffic. This takes into account passenger distribution on
different gauges, for different leads of movement, and for each individual
class of travel, as also separately by Mail/Express/Passenger train services.
The resulting analysis of additional passenger traffic and passenger kms. are
used to arrive at the additional vehicle kms. requirements based on
progressively improving norms of vehicle usage and avail Ability. 815. After the total freight and passenger traffic
to be carried is thus worked out on the basis of sectoral analysis, as
well as the rate of growth analysis, and the traffic targets are fixed at the
overall level, exercises are undertaken to
determine the approximate requirements on an overall basis, of rolling Mock
in respect of wagons, coaches and
locomotives. 816. The next step is to determine the resources by
way of Rolling Stock, line capacity works, new
lines and conversions, as necessary. Electrification plans
are also dovetailed, and provision is made for works in
the field of Signalling etc. Thus the Railway's development
programmes for the five-year plan are formulated. 817. The methodology of planning involves not only
the assessment of overall rolling stock requirements for the Five
Year Plan period, but also th2 determination of the approximate
requirements broadly assessed under the various plan heads, such as— (i) Rolling Sotck ; (ii) Workshops and Sheds ; (iii) Machinery and Plant ; (iv) Track renewals ; (v) Bridge works ; (vi) Traffic facilities ; (vii) Signalling and Safety ; (viii) Computerisation ; (ix) Electrification ; (x) Other electrical works ; (xi) New lines ; (xii) Staff quarters ; (xiii) Staff welfare ; (xiv) Users' amenities ; (xv) Other specified works ; (xvi) Inventories ; (xvii) Metro Transport Project; (xviii) Railway Research; and (xix) Investment in P. S. Us. Under each of the above Plan heads, the Planning
Directorate co-ordinates the requirements and lays down target for
the Plan period. 818. The Plan frame is now ready for incorporation
in the draft
Five Year Plan—'both in physical and
financial terms—to be submitted to the
Planning Commission. The draft
is taken up for detailed discussions in the Planning
Commission, at which adjustments may be
made depending upon the financial resources
available. In this way emerges the final
plan. It is subjected to a periodical
review based on the growth of the expected
traffic, and this review is conducted under the aegis of
the Planning Commission jointly with
the Economic Ministries, and shortfalls and fluctuations are
analysed and necessary alterations made in the plan. 819. The Railways' Five Year Plan is implemented
through action-oriented Annual Plans. Tentative outlays far the various
Railway Zones and Production Units are communicated to them each
year, so that they can prepare an annual list of projects
for consideration. After scrutiny and finalisation, a draft
Annual Plan for the entire system is prepared. This
is discussed at a meeting with the Planning Commission at which
the Finance Ministry is also
represented. The extent of availability of resources for
the particular year
is indicated. The Annual Plan
as then finalised forms the basis of the Demands for Grants in respect of
works expenditure which is voted by Parliament through the Railways' Annual
Budget. The ultimate
distribution of funds and choice of
projects are communicated to the Zones after the Budget approval. 820. Financing of the plan expenditure.—'All expenditure
on the Railways (other than the ordinary working expanses) is financed either
from Capital (loaned from the General Revenues) or from the Depreciation
Reserve Fund, or the Development Fund or the Accident Compensation, Safety
and Passenger Amenities Fund. Soma minor Open Line Works are
directly charged to the Railway Revenues. 821. The sources from which any particular type of
expenditure is to be financed, are determined in accordance with the rules of
allocation as approved by Parliament on the recommendations of the Railway
Convention Committee (see Chapter VII). Presently, apart from the
construction of new lines which in all cases are -financed .from Capital
funds provided by the General Revenues, all works which when completed would
yield a specified return on the investment are also charged to Capital.
Replacements and renewals of the Railways' assets by improved assets at
current costs are met out of the Depreciation Reserve Fund. The Development
Fund bears the cost of works which are not directly remunerative as Railway
Users' Amenities, Staff Quarters and amenities and also certain operating
improvements which are not expected to yield the requisite level of return on
investment. Where due to inadequate surpluses, the Development Fund cannot
meet all its obligation In full, temporary loans are taken from the General
Revenues In accordance with the recommendations of the Railway Convention
Committees as accepted by Preferment. The Accident Compensation, Safety and
Passenger Amenities Fund is financed from a special surcharge levied on
passenger traffic bears expenditure on compensation claims arising out of
accidents to passengers resulting in death or total disablement, safety works
and users' amenities works specified in this behalf. Ministry of Railways
also generate funds through public borrowings (R F C's Bonds) to finance its
Development Plans. 822. The Railways' plan outlay involves both rupee and foreign
exchange expenditure. For the latter, the Railways depend
entirely on the allocations made by the Ministry of Finance out of the
country's overall foreign exchange earnings
or from foreign borrowings. Irrespective of the source of
foreign exchange, however, the Railways must find the rupee
equivalent of the sums required in foreign currency, so that ultimately the
entire expenditure is reflected under one or the other source mentioned In
Para 821. Its the recent years, Railways have
generated funds through borrowings from International Financial institutions
such as World Bank, Asian Development Bank, etc. In the aggregate, the plan
outlay of the Railways is financed as follows :—. (or) Internal generation of resources— (i) appropriations made to the Depreciation Reserve
Fund, (ii) appropriations made to the Pension Fund, (iii) capital works directly charged off as revenue
expenditure, (iv) retained surplus (which may be transferred to
Development Fund or Revenue Reserve Fund). (v) surcharge on passenger traffic credited to Accident
Compensation, Safety and Passenger Amenities Fund, and (vi) interest on Fund Balances. {b) Capital provided by General Revenues— (i) in the form
of increase in the Capital-at-charge of the Railways,
and
' (ii) temporary loans for
financing expenditure chargeable to Development Fund and/or Revenue
Reserve Fund- 823. Tables I to 111 below illustrate
the principles of financing the plan expenditure
stated above. The figures have been assumed
purely for the purpose of illustration. TABLE I -VII th FIVE YEAR PLAN -RAILWAYS Outlay during 1985-90
TABLE II -SUMMARISED FINANCIAL RESULTS FOR THE VII th PLAN
PERIOD(1985-90)
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1.What is the primary purpose of
National Planning according to the text?
- A) To increase military strength
- B) To organize efficient exploitation of the country's
resources
- C) To promote tourism
- D) To reduce taxation
Answer: B) To organize efficient
exploitation of the country's resources
2.How do Railways contribute to
the economic progress of the country?
- A) By transporting raw materials and finished goods
- B) By reducing fuel prices
- C) By promoting international trade
- D) By developing real estate
Answer: A) By transporting raw
materials and finished goods
3.What system is Railway planning
geared to?
- A) Annual budgetary planning
- B) Decadal planning system
- C) Five-year planning system
- D) Monthly operational planning
Answer: C) Five-year planning system
4.What is the primary focus of
the fifteen-year Corporate Plan (1985-2000)?
- A) To increase passenger fares
- B) To provide rail transport at the lowest cost
- C) To build more railway stations
- D) To reduce the number of trains
Answer: B) To provide rail transport
at the lowest cost
5.Which of the following is NOT
an objective of the Corporate Plan?
- A) Developing organizationally effective personnel
- B) Establishing a corporate image
- C) Providing transport only for freight
- D) Working in association with other modes of
transportation
Answer: C) Providing transport only
for freight
6.What does the Railway's
planning process include?
- A) Forecasting the growth of passenger and freight
traffic
- B) Building new airports
- C) Promoting international tourism
- D) Reducing the number of rail lines
Answer: A) Forecasting the growth of
passenger and freight traffic
7.What is the role of the
Planning Commission in Railway planning?
- A) To conduct integrated studies for traffic forecasts
- B) To build new railway stations
- C) To set passenger fare rates
- D) To manage railway staff recruitment
Answer: A) To conduct integrated
studies for traffic forecasts
8.What do the Working Groups and
Sub-Groups under the Planning Commission focus on?
- A) Setting up new restaurants in railway stations
- B) Assessment of financial resources and systems
analysis
- C) Promoting cultural events on trains
- D) Advertising railway services
Answer: B) Assessment of financial
resources and systems analysis
9.Which sectors are included in
the main Steering Group in the Transport and Communications Sector?
- A) Tourism and Hospitality
- B) Freight traffic projections and Passenger traffic projections
- C) Real Estate Development
- D) Information Technology Services
Answer: B) Freight traffic
projections and Passenger traffic projections
10. How has the originating
traffic on Indian Railways changed from 1950-51 to 1989-90?
- A) Decreased by 270%
- B) Increased by 100%
- C) Increased by 270%
- D) Remained the same
Answer: C) Increased by 270%
11. What is considered a more
precise measure of freight traffic than originating tonnage?
- A) Gross Tonne Kilometers (GTK)
- B) Net Tonne Kilometers (NTKM)
- C) Passenger Kilometers (PKM)
- D) Kilowatt Hours (KWh)
Answer: B) Net Tonne Kilometers
(NTKM)
12. What is the significance of
the 'lead' in freight traffic?
- A) It represents the speed of trains
- B) It indicates the distance over which traffic moves
- C) It shows the number of passengers
- D) It reflects the amount of cargo loaded
Answer: B) It indicates the distance
over which traffic moves
13.How is the growth of passenger
traffic anticipated?
- A) By conducting interviews with passengers
- B) By analyzing past trends
- C) By guessing the potential number of tourists
- D) By counting the number of train tickets sold
Answer: B) By analyzing past trends
14.What factors are considered in
determining the requirements of rolling stock?
- A) The number of railway stations
- B) The future growth of traffic and replacement of
over-aged assets
- C) The length of the railway tracks
- D) The number of railway staff
Answer: B) The future growth of
traffic and replacement of over-aged assets
15.What does the Railway's
development programme include in terms of planning?
- A) Building new airports
- B) Track renewals and bridge works
- C) Promoting tourism
- D) Reducing the number of train services
Answer: B) Track renewals and bridge
works
16.How is the Railway's plan
outlay financed?
- A) Solely through ticket sales
- B) Through Capital from General Revenues and other
funds
- C) Only through international loans
- D) By selling railway property
Answer: B) Through Capital from
General Revenues and other funds
17.Which fund is used for
replacements and renewals of the Railways' assets?
- A) Development Fund
- B) Accident Compensation Fund
- C) Depreciation Reserve Fund
- D) Pension Fund
Answer: C) Depreciation Reserve Fund
18.What is the source of
financing for the Accident Compensation, Safety, and Passenger Amenities Fund?
- A) Ticket sales
- B) Public borrowings
- C) Surcharge on passenger traffic
- D) Government grants
Answer: C) Surcharge on passenger
traffic
19.What are the sources of
foreign exchange expenditure for the Railways?
- A) Tourism revenue
- B) Allocations from the Ministry of Finance
- C) Donations from international organizations
- D) Export of railway equipment
Answer: B) Allocations from the
Ministry of Finance
20.Which of the following is NOT
a component of the Railway's planning methodology?
- A) Assessment of rolling stock requirements
- B) Building new cinema halls in stations
- C) Track renewals and electrification plans
- D) Formulation of the Annual Plan
Answer: B) Building new cinema halls
in stations
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