03-13-2008, 11:54 PM
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Recent extraordinary spectacles of students from prestigious management schools of USA lining up to listen to the self-proclaimed 'management guru', Lalu may be recalled. I learn from reliable sources that the cost of these trips from USA were fully funded by the Indian Railways.
The management school worthies were not able to see through the game Lalu played with Railway accounts.
He did NOT achieve a miracle turn-around of the Railways from a loss-making to a profit-making enterprise, within one year of his assuming charge as Railway Minister.
What happened was simply this. An accounting gimmick to exclude from the Railway the 'contribution to the General Revenues (i.e., Consolidated Fund of India)' mandated under the Railways Act of 1868, after the Railways accounts were separated from the General budget (so as not to cause ebbs and tides in the central exchequer with heavy outflows needed for capital investments and depreciation provisions).
I want to make two points.
Point 1: accounting gimmick
Railway's capital requirements are treated as loan taken from the Central exchequer (also called General Revenues). So, the Indian Railways are obligated to repay the loan and also to pay interest on the borrowed funds. Unfortunately, this does not happen. Only 'contribution to General Revenues' is made every year at an arbitrary rate fixed by a non-descript group of bureaucrats who write the periodical reports called 'Reports of Railway Convention Committee'. Simply put, the Railway enterprise does not have the capacity to generate enough funds to meet its capital investment needs or even make provision for depreciation of its assets. It is simply a leech on the Central Exchequer. By an accounting gimmick, these contributions were excluded from the computation of 'profit/loss' in its Balance Sheet; voila, suddenly, the Indian Railways was shown as a profit-making public sector enterprise.
Point 2: 'rationalisation of Railway freight charges'
If at all, the turn around in increased Railway revenues occurred -- over 4 to 5 years -- because of the initiatives of the earlier Railway Minister, a professional, Shri Nitish Kumar who is now CM of Bihar state. He introduced a 'rationalised' freight structure which simply meant that the freight rates were increased drastically and many PSU's of the steel and coal and other bulk-goods freight generators were asked to pay more for the freight carried on Indian Railways. This was simply a book transfer from one PSU (such as Coal India or Steel Authority of India and its subsidiaries) to another Govt. Dept., in this case, the Indian Railways. This is the move which resulted in increased 'revenues' for the Indian Railways during Lalu regime.
See the article by Smt. Vijayalakshmi V, former FC of the Indian Railways: http://www.thehindubusinessline.com/2007/0...52400570900.htm
See VA Padmanabham, IRAS article at: http://www.irastimes.org/Towards_better_pr...ay_accounts.htm
See Code for the Accounts department of Indian Railways at: http://www.indianrailways.gov.in/financeco...de1/preface.htm
If capital expenditures are met from borrowings from the financial market and if such borrowings are serviced through current interest rate payments and principal repayments, Indian Railways will be seen as a white elephant by any commercial standards of book-keeping and financial accounting.
One can fool some for some time as has happened with the management school worthies from USA wharton school etc. But it is time to prick the bubble, to change the metaphor, call a spade a spade, call Lalu a magician juggling with numbers (aha, money that he does not own as a shareholder).
If the maintenance of Railway Accounts are outsourced to, say, the Chartered Accountants Institute of India, the balance sheet will show a dismal picture of an inefficient system with too many cooks spoiling the broth. Sure, as a social enterprise, it does provide employment for over 1.7 million workers (excluding contractors' staff), but if such a large number of people are needed is quite another story for enquiry by real management gurus.
The latest gimmick is reservation 3 months' in advance (against the present practice of 1 month in advance). Railways will earn interest on these deposits. This means simply interest-free revenues from aam admi to satisfy Lalu's ego.
-xxxx
March 09, 2008
Lalu fudges figures for Railways' shine
There is also an attempt at concealment of figures. After presentation of the 2007-08 budget, without approval of Parliament, ticket cancellation and return ticket booking charges were unilaterally increased three-fold.
Railway Minister Lalu Prasad Yadav says that he has done an "indrajal"â magic with the Railway Budget and shown a "profit" of Rs 25,000 crore even after giving slew of "concessions". Unfortunately enough the media was carried away largely by his rhetoric without caring to go into the reality. That means Lalu has given no concession neither has he made any cut in fares of freight at any level. Sadly the mediaâexcept for one or two TV channels and newspapersâ gulped whatever the "magician" tried to force on them.
Lalu announced Rs 21,578 crore as surplus in his 2007-08 budget. The reality is "the excess for 2006-07 amounts to less than half at Rs 10,206 crore" as given in the detailed Explanatory Memorandum of the budget. Accordingly, there was Rs 416 crore reduced net revenue last year. The budget speech is silent on this non-performance.
This calls for serious introspection. It is unlikely that Railways would have a surplus of Rs 25,000 crore in 2008-09 either. It may even be less than the actual figures of 2007-08.
As one listens live reading the budget on television, his "nautanki" mesmerizes. What has Lalu given to the passengers? Precious little. Even four per cent cut in fares on sleeper class fare and eight per cent in AC-3 tier and chair car announced in the last year'sâ2007-08âbudget has not been passed on to the passengers. There was a clause that it would be effected after the introduction of new LHB coaches. Since not many sleeper coachesâwith 81 berths, AC-3 tier coaches with 72 berths and chair car with 102 seatsâwere added, Chairman Railway Board K.C. Jena announced, soon after presentation of the new budget, the benefit could not be given. (The new coaches also compromise on passenger comfort, as berths are narrower and shorter with less legroom and luggage space. Apart from this, the eight seats that are added to the side berths have created ventilation problem. Chair car seats are also narrower).
Lalu's this year's announcement of 7 per cent cut on AC-I, 4 per cent on AC-2 tier fare are unlikely to benefit the people. The rider, Lalu says, is: "This reduction will be only 50 per cent for popular trains and during peak period".
What is the lean season? The Chairman says it means the period between February 1 and March 31 and August 1 and August 31. The restânine monthsâis peak season. So Lalu earns the kudos without having to give anything. What is a popular train? Chairman says it is being worked out but indicated that majority of the trains are in that category.
The jugglery in figures become acute as one reads through the figures. His surpluses include Rs 1250 crore on account of anticipated 6th Pay Commission recommendationsâRs 750 crore in ordinary working expenses and Rs 50 crore in pension fund. It also includes a deferred dividend liability of Rs 664 crore.
But he conceals that his liability on provident fund, retirement benefits and pension have gone up by Rs 500 croreâfrom Rs 9,706 crore in budget estimates to Rs 1482 crore. It has increased by Rs 428 crore on staff amenities. There has been Rs 598 crore increase in maintenance of plant equipment cost, Rs 657 crore on rolling stock and equipment. On several other heads too similar increases have been indicated. This only reveals that claims in the Railway Budget speech are different from the reality.
There is also an attempt at concealment of figures. After presentation of the 2007-08 budget, without approval of Parliament, ticket cancellation and return ticket booking charges were unilaterally increased three-fold. Tatkal tickets, which were only ten per cent of the total seats, were increased to 30 per cent. The Railway Budget does not reveal the additional earning on this count. When asked for details the Chairman said he did not have figures with him and it had to be worked out.
The budget also does not take into account how much more passengers are shelling out on declaration of 200 trains as superfast.
The Railway Minister appeared very generous in announcing 6 per cent cut in freight rates for goods headed to North-East. But he concealed that one travelling to North-East from Guwahati has to shell out more. Earlier, one could buy a single ticket if one had to change trains for an onward destination. Now, for example, a person travelling from Mumbai to Guwahati could earlier buy a Mumbai-Howrah-Guwahati ticket for Rs 557. Now, he has to buy a Mumbai-Howrah ticket for Rs 517 and another ticket for Howrah-Guwahati for Rs 369. It is estimated that Railways are earning Rs 100 crore at least on this count.
Tatkal surcharge was Rs 100 per ticket. It has increased to Rs 250 per ticket. And all this has been done without any sanction of Parliament.
How did he manage to show the surplus last year (in many cases he has done a repeat this year) ? He had shown Rs 9,000 crore pension funds as cash surplus, included Rs 2500 crore miscellaneous funds as earnings, Rs 1700 crore due to the Indian Railway Finance Commission shown in the profit account, profits were shown to be shored up by showing advance earnings from the coming years budget, hidden costs to passenger tickets earned the Railways
Rs 300 crore and higher tonnage carried by the Railways ignoring safety concerns earned it Rs 5000 crore. (Though it has added to the maintenance costs and rail fractures have gone up).
Lalu Yadav does not add the additional costs on many counts particularly the safety aspects. In his speech, he admits that the number of accidents at unmanned level crossing in 2006-07 (final figures) has increased by 13 per cent as compared to 15 per cent in 2001-02âa year Lalu derides as a period of dire straits "before the UPA government". Almost 35 per cent of the total accidents were at level crossings in 2006-07âof a total of 195 accidents 72 were at level crossings.
Higher freight tonnage has led to serious track conditions. Various zonal Railways, including East Coast Railway, Southeastern Railway, Southern Railway and South Central Railway reported higher rail and welding fractures, failure of electric locos, brake beam defects and increased en route detachment due to wagon body bulging, stalling and wheel burns. It has also increased vulnerability of large number of bridges.
The Comptroller and Auditor General has also noted serious concern on this count. It noted in its 2006 report: "Wagons were overloaded even beyond the axle load tolerance. This was likely to have an adverse impact on track bridges and rolling stock. The railways permitted enhanced loading of wagons without monitoring the impact of enhanced loading."
The budget does not indicate any step being taken to rectify itânor does it indicate how much extra it has cost the Railways in repairs on these counts. CAG has also pointed to yet another factorâspeed restrictions owing to prolonged continuance of repair works. CAG says it has led to loss of productivity and added several other costs.
So there is no "indrajal"âmagicâin Lalu's budget. It tries to create an illusion and conceal from the people and its supreme bodyâParliamentâthe reality. The Railways are not in the ship-shape, the minister has tried to picture.
http://www.organiser.org/dynamic/modules.p...&pid=227&page=3
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Recent extraordinary spectacles of students from prestigious management schools of USA lining up to listen to the self-proclaimed 'management guru', Lalu may be recalled. I learn from reliable sources that the cost of these trips from USA were fully funded by the Indian Railways.
The management school worthies were not able to see through the game Lalu played with Railway accounts.
He did NOT achieve a miracle turn-around of the Railways from a loss-making to a profit-making enterprise, within one year of his assuming charge as Railway Minister.
What happened was simply this. An accounting gimmick to exclude from the Railway the 'contribution to the General Revenues (i.e., Consolidated Fund of India)' mandated under the Railways Act of 1868, after the Railways accounts were separated from the General budget (so as not to cause ebbs and tides in the central exchequer with heavy outflows needed for capital investments and depreciation provisions).
I want to make two points.
Point 1: accounting gimmick
Railway's capital requirements are treated as loan taken from the Central exchequer (also called General Revenues). So, the Indian Railways are obligated to repay the loan and also to pay interest on the borrowed funds. Unfortunately, this does not happen. Only 'contribution to General Revenues' is made every year at an arbitrary rate fixed by a non-descript group of bureaucrats who write the periodical reports called 'Reports of Railway Convention Committee'. Simply put, the Railway enterprise does not have the capacity to generate enough funds to meet its capital investment needs or even make provision for depreciation of its assets. It is simply a leech on the Central Exchequer. By an accounting gimmick, these contributions were excluded from the computation of 'profit/loss' in its Balance Sheet; voila, suddenly, the Indian Railways was shown as a profit-making public sector enterprise.
Point 2: 'rationalisation of Railway freight charges'
If at all, the turn around in increased Railway revenues occurred -- over 4 to 5 years -- because of the initiatives of the earlier Railway Minister, a professional, Shri Nitish Kumar who is now CM of Bihar state. He introduced a 'rationalised' freight structure which simply meant that the freight rates were increased drastically and many PSU's of the steel and coal and other bulk-goods freight generators were asked to pay more for the freight carried on Indian Railways. This was simply a book transfer from one PSU (such as Coal India or Steel Authority of India and its subsidiaries) to another Govt. Dept., in this case, the Indian Railways. This is the move which resulted in increased 'revenues' for the Indian Railways during Lalu regime.
See the article by Smt. Vijayalakshmi V, former FC of the Indian Railways: http://www.thehindubusinessline.com/2007/0...52400570900.htm
See VA Padmanabham, IRAS article at: http://www.irastimes.org/Towards_better_pr...ay_accounts.htm
See Code for the Accounts department of Indian Railways at: http://www.indianrailways.gov.in/financeco...de1/preface.htm
If capital expenditures are met from borrowings from the financial market and if such borrowings are serviced through current interest rate payments and principal repayments, Indian Railways will be seen as a white elephant by any commercial standards of book-keeping and financial accounting.
One can fool some for some time as has happened with the management school worthies from USA wharton school etc. But it is time to prick the bubble, to change the metaphor, call a spade a spade, call Lalu a magician juggling with numbers (aha, money that he does not own as a shareholder).
If the maintenance of Railway Accounts are outsourced to, say, the Chartered Accountants Institute of India, the balance sheet will show a dismal picture of an inefficient system with too many cooks spoiling the broth. Sure, as a social enterprise, it does provide employment for over 1.7 million workers (excluding contractors' staff), but if such a large number of people are needed is quite another story for enquiry by real management gurus.
The latest gimmick is reservation 3 months' in advance (against the present practice of 1 month in advance). Railways will earn interest on these deposits. This means simply interest-free revenues from aam admi to satisfy Lalu's ego.
-xxxx
March 09, 2008
Lalu fudges figures for Railways' shine
There is also an attempt at concealment of figures. After presentation of the 2007-08 budget, without approval of Parliament, ticket cancellation and return ticket booking charges were unilaterally increased three-fold.
Railway Minister Lalu Prasad Yadav says that he has done an "indrajal"â magic with the Railway Budget and shown a "profit" of Rs 25,000 crore even after giving slew of "concessions". Unfortunately enough the media was carried away largely by his rhetoric without caring to go into the reality. That means Lalu has given no concession neither has he made any cut in fares of freight at any level. Sadly the mediaâexcept for one or two TV channels and newspapersâ gulped whatever the "magician" tried to force on them.
Lalu announced Rs 21,578 crore as surplus in his 2007-08 budget. The reality is "the excess for 2006-07 amounts to less than half at Rs 10,206 crore" as given in the detailed Explanatory Memorandum of the budget. Accordingly, there was Rs 416 crore reduced net revenue last year. The budget speech is silent on this non-performance.
This calls for serious introspection. It is unlikely that Railways would have a surplus of Rs 25,000 crore in 2008-09 either. It may even be less than the actual figures of 2007-08.
As one listens live reading the budget on television, his "nautanki" mesmerizes. What has Lalu given to the passengers? Precious little. Even four per cent cut in fares on sleeper class fare and eight per cent in AC-3 tier and chair car announced in the last year'sâ2007-08âbudget has not been passed on to the passengers. There was a clause that it would be effected after the introduction of new LHB coaches. Since not many sleeper coachesâwith 81 berths, AC-3 tier coaches with 72 berths and chair car with 102 seatsâwere added, Chairman Railway Board K.C. Jena announced, soon after presentation of the new budget, the benefit could not be given. (The new coaches also compromise on passenger comfort, as berths are narrower and shorter with less legroom and luggage space. Apart from this, the eight seats that are added to the side berths have created ventilation problem. Chair car seats are also narrower).
Lalu's this year's announcement of 7 per cent cut on AC-I, 4 per cent on AC-2 tier fare are unlikely to benefit the people. The rider, Lalu says, is: "This reduction will be only 50 per cent for popular trains and during peak period".
What is the lean season? The Chairman says it means the period between February 1 and March 31 and August 1 and August 31. The restânine monthsâis peak season. So Lalu earns the kudos without having to give anything. What is a popular train? Chairman says it is being worked out but indicated that majority of the trains are in that category.
The jugglery in figures become acute as one reads through the figures. His surpluses include Rs 1250 crore on account of anticipated 6th Pay Commission recommendationsâRs 750 crore in ordinary working expenses and Rs 50 crore in pension fund. It also includes a deferred dividend liability of Rs 664 crore.
But he conceals that his liability on provident fund, retirement benefits and pension have gone up by Rs 500 croreâfrom Rs 9,706 crore in budget estimates to Rs 1482 crore. It has increased by Rs 428 crore on staff amenities. There has been Rs 598 crore increase in maintenance of plant equipment cost, Rs 657 crore on rolling stock and equipment. On several other heads too similar increases have been indicated. This only reveals that claims in the Railway Budget speech are different from the reality.
There is also an attempt at concealment of figures. After presentation of the 2007-08 budget, without approval of Parliament, ticket cancellation and return ticket booking charges were unilaterally increased three-fold. Tatkal tickets, which were only ten per cent of the total seats, were increased to 30 per cent. The Railway Budget does not reveal the additional earning on this count. When asked for details the Chairman said he did not have figures with him and it had to be worked out.
The budget also does not take into account how much more passengers are shelling out on declaration of 200 trains as superfast.
The Railway Minister appeared very generous in announcing 6 per cent cut in freight rates for goods headed to North-East. But he concealed that one travelling to North-East from Guwahati has to shell out more. Earlier, one could buy a single ticket if one had to change trains for an onward destination. Now, for example, a person travelling from Mumbai to Guwahati could earlier buy a Mumbai-Howrah-Guwahati ticket for Rs 557. Now, he has to buy a Mumbai-Howrah ticket for Rs 517 and another ticket for Howrah-Guwahati for Rs 369. It is estimated that Railways are earning Rs 100 crore at least on this count.
Tatkal surcharge was Rs 100 per ticket. It has increased to Rs 250 per ticket. And all this has been done without any sanction of Parliament.
How did he manage to show the surplus last year (in many cases he has done a repeat this year) ? He had shown Rs 9,000 crore pension funds as cash surplus, included Rs 2500 crore miscellaneous funds as earnings, Rs 1700 crore due to the Indian Railway Finance Commission shown in the profit account, profits were shown to be shored up by showing advance earnings from the coming years budget, hidden costs to passenger tickets earned the Railways
Rs 300 crore and higher tonnage carried by the Railways ignoring safety concerns earned it Rs 5000 crore. (Though it has added to the maintenance costs and rail fractures have gone up).
Lalu Yadav does not add the additional costs on many counts particularly the safety aspects. In his speech, he admits that the number of accidents at unmanned level crossing in 2006-07 (final figures) has increased by 13 per cent as compared to 15 per cent in 2001-02âa year Lalu derides as a period of dire straits "before the UPA government". Almost 35 per cent of the total accidents were at level crossings in 2006-07âof a total of 195 accidents 72 were at level crossings.
Higher freight tonnage has led to serious track conditions. Various zonal Railways, including East Coast Railway, Southeastern Railway, Southern Railway and South Central Railway reported higher rail and welding fractures, failure of electric locos, brake beam defects and increased en route detachment due to wagon body bulging, stalling and wheel burns. It has also increased vulnerability of large number of bridges.
The Comptroller and Auditor General has also noted serious concern on this count. It noted in its 2006 report: "Wagons were overloaded even beyond the axle load tolerance. This was likely to have an adverse impact on track bridges and rolling stock. The railways permitted enhanced loading of wagons without monitoring the impact of enhanced loading."
The budget does not indicate any step being taken to rectify itânor does it indicate how much extra it has cost the Railways in repairs on these counts. CAG has also pointed to yet another factorâspeed restrictions owing to prolonged continuance of repair works. CAG says it has led to loss of productivity and added several other costs.
So there is no "indrajal"âmagicâin Lalu's budget. It tries to create an illusion and conceal from the people and its supreme bodyâParliamentâthe reality. The Railways are not in the ship-shape, the minister has tried to picture.
http://www.organiser.org/dynamic/modules.p...&pid=227&page=3
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