CHAPTER VI

INVESTMENT PLANNING AND WORKS BUDGET

Investment Planning and Works Programme Section
601

Investment Planning and Works Programme - General

603

Advance Planning

607

Scrutiny of Schemes before preparation of Preliminary Works Programme

609

Preparation of Preliminary Works Programme

622

Integrated Budget

623

Final Works Programme

624

Works Budget

625

Demand for Works Grant

626

Financing of Works Budget

628

Distribution of Funds by Railway Board

632

General Rules on Budget

633.

Planning for Survey

General

601. Investment decisions relating to the creation, acquisition and replacement of assets on the Railways
are processed through the annual "Work, Machinery and Rolling Stock Programme". Instructions regarding
the preparation of the Machinery and Rolling Stock Programme are contained in Chapter XV of the Indian
Railway Code of Mechanical Department (Work shops). On the basis of the estimate of the Plan funds
requirement for the ensuing year, the Railway Board lay down the financial limits (see para 609) under
various plan heads (refer to Appendix I) within which the Railway Administrations are required to make out
their programme for the following years duly vetted by the Financial Advisor and Chief Accounts Officer for
submission to the Railway Board by a specified date. The programmes are examined by the Railway Board
and discussed, where necessary, with the General Managers and the works to be undertaken as well as the
outlays during the Budget year are decided upon.
602. The various stages of investment planning and preparation of the Final Works Programme are given
below :

(i) Formulation of schemes as a part of advance planning;

(ii) Submission of major schemes for advance scrutiny and clearance by the Railway Board for
selection of Projects to be taken up in the following year.
(iii) Preparation of the Preliminary Works Programme within the financial ceiling laid down by the
Railway Board ; and
(iv) Discussions with the Railway Board and submission of the Final Works Programme.

The investment planning process through the above stages is dealt with in the following paragraphs :Advance Planning
603. The preparation of the annual Works Programme of a Railway is not an isolated exercise for the year,
but is part of a continuous planning process from the level of the Divisional Officer upwards. Investment
proposals emanating from the Division would be those which are intended to effect improvement in
operation or remove bottlenecks etc., within the Division itself. Major investment proposals which benefit a
Zonal Railway System or the Indian Railway as whole should be co-ordinated and planned at the level of the

Railway Headquarters or the Railway Board, where necessary.

604. An important requirement for effective investment planning is the realistic estimation of project costs.
Full details of the scheme must be worked out and no scheme should be included in the Railway's Works
Programme unless detailed plans and estimates have been prepared and are ready. Detailed Traffic and
Engineering surveys should be carried out for new lines, gauge conversions doublings and for other line
capacity works costing more than Rupees Five Crores each. In the case of yard remodellings, line capacity
works i. e., goods shed facilities and important buildings the estimates should be based on plans approved
and signed by the concerned departments who should scrutinize the plans carefully to avoid the need for
making any substantial modifications in the required facility at a subsequent stage.
If major changes in the plans/schemes/specifications of works nevertheless become necessary and are likely
to lead to substantial excesses over the sanctioned estimates the changes asked for by the concerned
departments should not be agreed to unless reviewed and approved by the competent authority sanctioning
the original estimate. In regard to proposals for new marshalling yards goods terminals, and tranship yards
etc., work study teams should go into the actual working before formulating schemes for the additional
facilities required.
605. It is an essential feature of the railway system as a commercial undertaking that expenditure, other
than that wholly chargeable to ordinary Revenue, incurred on new assets or for improvement of existing
assets should be financially justified before it is incurred. Detailed instructions regarding the financial
appraisal of Railway projects are contained in Chapter II of the Indian Railway Financial Code to which
reference may be made. The cases where no financial justification need be given are contained in para 202
of the Indian Railway Financial Code. Detailed financial implications (including financial return) should be
worked out in all cases including works financed from Development Fund, Accident Compensation, Safety
and Passenger Amenities Fund or Open Line Works Revenue (see para 626). If the prescribed return is found
to be not obtainable on the anticipated level of traffic, the Railway Administration should examine whether
the proposal cannot be reduced in scop, or given up in favour of some other alternative, or postponed until
traffic prospects improve.
606. When a number of works have to be carried out to achieve a common objective, the financial
implications or justification should be worked out for the entire scheme as a whole. In case where the wider
schemes covers two railway, a joint estimate of cost should be prepared for the Railway Board's
consideration. The Railway in which the major portion of the work falls should obtain figures from the
contiguous Railway for submitting joint figures of cost and financial implication to the Railway Board.
Scrutiny of Schemes before preparation of Preliminary Works Programme
607. All schemes costing Rs. 20 lakhs or above should be worked out comprehensively and sent to the
Board along with full details of (i) the technical features, (ii) Cost break-up. (iii) benefit expected to accrue
and (iv) financial implications. A sketch map of each proposal should also be sent. The Railway
Administration must clearly bring out the purpose of each scheme and confirm that the proposal meets the
objective fully and that the scope and cost of the project have been arrived at after the fullest possible
investigation including assessment of the financial implications. After the schemes have been scrutinized by
the Board, the Railway Administrations should be advised of the acceptance, with or without any
modifications for inclusion in the Works programme.
608. Track renewal proposals costing Rs. 20 lakhs and above are initially scrutinised by the Board, keeping
in view the availability of permanent way materials, progress of the works already sanctioned and other
technical factors. For this purpose the Railway Administrations should send all track renewal proposals
costing Rs. 20 lakhs and above together with technical data like traffic density, age, conditions of track
components etc., in the form prescribed by the Board to reach the Boards office by the stipulate date. After
the proposals are screened by the Board, guidelines are issued to the Railway Administrations to reframe
their proposals for inclusion in the Works Programme.
Preparation of the Preliminary Works Programme
609. The Chief Engineer of the Railway will be primarily responsible for ensuring that the proposals
prepared by the various departments are complete in all respects and are correctly prepared. The overall
priorities within the ceilings given by the Board will also be fixed by him in consultation with the General
Manager and other Heads of Departments. He will be responsible for the preparation and timely submission
of the Preliminary and the Final Works Programme.
610. In or about June/July each year the Railway Board should convey to each Railway, in respect of each
Plan Head, the total outlay within which the Works Programme should be framed by the Railway. A list of the
Plan Heads is given in Annexure I. On receipt of this financial ceiling the Railway administrations should take
stock of the schemes already formulated and those under consideration and select for inclusion in the Works
programme within the financial ceiling such works as are expected to yield the maximum benefit to the
Railway, preference being given to works in progress. Further necessary changes in the investment schedule
may be made in order to work within the financial ceiling for the year such modifications being taken note of
in framing the preliminary Works Programme and revising the financial implications, if necessary.
611. The Preliminary Works Programme for the following year should be submitted by the Railways to the
Railway Board by 1st week of September or such earlier date as may be laid down by the Board. Proper
financial appraisal of each work should be given in the Preliminary Works Programme together with the
comments of the Financial adviser and Chief Accounts Officer.
612. The project cost should be based on firm data both as to quantity and rates at current price levels, and

should any increase occur in prices during the period intervening between the initial preparation of the
project estimate and its inclusion in the works Programme, the estimate should be updated taking into
account any significant changes in the wages and material prices as well as increase in freights and fares.
No other increase such as on account of change in scope of the project should be allowed without prior
reasons being adduced for acceptance by the Railway Board. A sketch showing the proposal should
accompany each proposal.
613. Each investment proposal should be accompanied by a detailed plan showing the scheduling of the
project to match the traffic requirements and the financial outlay proposed for the year should be in
accordance with this project schedule to enable the Railway Board to arrange for a realistic funds allocation
for implementation of the programme.
614. In deciding the outlays for the various works Railway Administrations must endeavour to progress all
works in progress speedily and bring them into use at the earliest possible date. A work which has been
sanctioned and for which funds have been allotted whether in the original or supplementary budget of a
year should be treated as a "work in progress" for the next year and provided for as such in the programme.
Such works should be grouped as indicated in para 619.
615. The Railway Administrations should make a realistic assessment of the amount required for each work
in progress and necessary provision should be made for it in the Works Programme. In estimating the
provision for works during the budget year a generous allowance should be made for those delays in
execution which though unforseen are known from experience to be so liable to arise particularly prior to
inception and during the initial stages of large projects. The provision made should take into account
adjustment of charges on surveys connected with a project.
616. In exhibiting the outlay for the current year against individual works in the works programme, the
outlay should be as per Pink Book, and in exceptional cases where the Railways propose any substantial
increase in the outlay with corresponding reductions against other works, such revised outlay may be shown
separately in brackets below the outlay as furnished in the Pink Book duly explaining the reasons for doing
so in footnotes at the appropriate places. As far as possible only the last sanctioned costs should be
exhibited. Wherever it is visualised that the cost would involve an excess over the last sanctioned cost,
effective steps should be taken well in time to have the revised estimate prepared and sanctioned by the
competent authority before the Works Programme is sent to the Board. In case where the revised estimates
are sanctioned subsequent to the despatch of the final Works Programme but before the end of January of
the following years the same should be promptly advise to the Board to enable to the latest sanctioned cost
being exhibited in the Pink Book to be circulated alongwith the Budget. In all case of revised costs
sanctioned by the Board, reference to the letter of sanction should invariably be indicated.
617. Works once introduced through a Works Programme (including Track Renewal Programme) and taken
up after the estimates have been sanctioned by the competent authority should continue to be included
every year till they are finally completed, except in case where the works have reached the completion stage
and where funds required if meagre could be found by reappropriation.
618. The Works Programme is compiled in the following format :Form E. 618
WORKS PROGRAMME 1975-76
Demand No...............................

Item No. Authority

1

Figures in thousands of rupees)

Expenditur
e
to end of
3/74

Particularso
Cost
f Works
3

Outlay for
1974-75

1975-76

Balance
8

Note :--Years have been shown in the form for the purpose of illustration.
In respect of "Works in Progress" reference to item No. of the current years Pink Book and also the
authority under which the work was first started should be indicated. The works should be arranged as per
the Plan Heads.
619. The items in the Works Programme should be grouped under the following categories while compiling
the Works Programmes :--

(i) New Works.

(ii) Works in Progress.

(iii) Works approved in earlier years, which have not been actually commenced and on which no
expenditure has been incurred till 30th June of the year previous to the Programme year.
(iv) Works approved in the earlier years but estimates for which have not been sanctioned by 30th
June of the year previous to the Programme year.

620. The works are further made into sub-groups of (i) Works costing more than Rupees Five Lakhs each

and (ii) Works costing upto Rupees Five lakhs each. Under (ii) works costing upto Rupees two lakhs each in
the case of Track Renewal works and for works costing upto Rupees one lakh each in the case of other works
only lumpsum provision should be shown without detailing individual works. Within each sub-group, the
works are presented under each Plan Head.
621. A map showing the Railway System and indicating the new lines, doublings, major yard remodellings,
important line capacity and signalling works which are in progress as well as proposed should be attached to
the Works Programme. An alphabetical index of works and various managerial information regarding critical
materials, expenditure position relating to passengers and railways users amenities etc. which will be
prescribed by Railway Board should be included.
622. Integrated Budget.-The Annual Budget of Railways consists of assessment of earnings and
expenditure forming part of Revenu Budget, and that relating to the investment decisions taken through the
Works Machinery and Rolling Stock Programmes. In order to co-relate the decisions relating to all these
aspects, a consolidated budget called integrated Budget including Revenue Budget, Works Programme and
the Machinery and Rolling Stock Programmes should be submitted by the Railways alongwith the preliminary
Works Programme. The Integrated Budget will include the projections of traffic and earnings, works working
expenses, the estimated financial results for the ensuing year, and the operating ratio in the proforma
specified by the Railway Board. The Railways should also furnish the details of Rolling Stock required on
replacement account and addition account, duly co-relating it to the anticipated increase in traffic. In the
covering note to the Intergrated Budget the Railways should bring out the effect of the budget proposals on
the efficiency of operations as indicated by the operating ratio and the financial viability of the system as
reveraled by the financial returns on cpaital investment. After discussion of the Preliminary Works
Programme, a revised Integrated Budget should be submitted along with the Final works Programme duly
taking into account the changes that might have taken place in the meanitime. The Integrated annual
budget may be prepared under the personal guidance of the General Manager and with the assistance of
Financial Adviser and Chief Accounts Officer.
Final Works Programme
623. After having examined the individual Railways Programme, and discussions with the General
Managers, the Railway Board will decide the works which should be undertaken during the following year
and which should be included in the Final Works Programme. The Railway Administration gives will then
modify their Works Programmes as a result of the Board's decision and send their Final Works Programme to
the Railway Board by the stipulated date.
Section II-Works Budget
624. Works Budget.--The revised and budget estimets for the construction, acquisition and replacement of
assets are briefly known as Works Budget. The revised estimate gives an estimate of funds required for the
current year and the budget estimate referes to the following year. For a detailed study of the Railway
Budget, Chapter III of the Indian Railway Financial Code should be refered to. The budget estimate for the
works are based on the Works Programme approved by the Board. The requirement of funds both for new
investments and for works in progress are submitted in the form of "Demand for Grants" in the Works
Machinery and Rollings Stock Programme which forms a part of the Budget papers presented to the
Parliament. While compiling the Works Machinery and Rolling Stock Programme for presentation in the
Parliament only works costing Rupees five lakhs and above are itemised.
Demand for Works Grants
625. The proposal of Government in respect of sums required to meet the expenditure from the
Consolidated Fund of India are to be submitted in the form of Demands for Grants to the Parilament. The
Demand shall be for gross expenditure, the credits or recoveries (refer to para 335 of Indian Railway
Financial Code) being shown in the form of footnotes to Demands.
The Demand for Grants for the Works Budget is :
Demand No. 16 : Assets-Acquisitions, Construction and Replacements.
Financing of Works Budget
626. Works chargeable to Demand No 16.Assets-Acquisitions Construction and Replacements are
financed from railway revenue when it is charged to OLWR or financed from Capital. Depreciation Reserve
Fund, Development Fund, Accident Compensation Safety and Passenger Amenities Fund. Expenditure
budgetted under "capital" involves increase in the Capital-at-charge of the Railways and hence is the liability
for payment of dividend to General Revenue subject to the relief/exemptions granted by the Convention
Committee. "Works expenditure" of the Railway is thus financed from Revenue, Railway Funds and Capital
provided by the General Revenues. The Railway Funds are Depreciation Reserve Fund, Development Fund
and Accident Compensation Safety and Passenger Amenities Fund. For Details regarding the operation of the
funds, reference may be made to Chapter. III of the Indian Railway Financial Code. In the event of the
railways revenue surplus not being adequate to fully meet the requirements of Development Fund
Expenditure, the budgetary support from the General Revenues would also include temporary loans to
finance expenditure from the Development Fund. The expenditure under works Budget of the Railways is,
therefore, determined by the resource allocation under various Plan Heads.
627. Credits or Recoveries. There are certain credits or recoveries which are excluded from the scope of
the Demands presented for vote of Parliament, (refer to para 335 of Indian Railway Financial Code for
details). Though these credits or recoveries are outside the scope of the Grants, they are booked in accounts

as reduction of expenditure, e.g. credit for released materials. A list of credits or recoveries which should be
excluded from the scope of the Demand should be sent in Form 335F along with the revised estimates of the
current year and budget estimates of the ensuing year under each Demand.
628. Distribution of Funds by the Railway Board. The Grants as voted by the Parliament and the
appropriations for charged expenditure (for details of `voted' and' charged' expenditure reference may be
made to paras 302 and 303 of the Indian Railway Financial Code) as sanctioned by the President are
distributed by the Railway Board among the Railway Administrations and other authorities, subordinate to
them as soon as possible after the Budget is sanctioned. The sums so distributed are called "Allotments" and
the orders by means of which the allotments are made are called "Budget Orders". The allotments made out
of funds voted by the Parliament are shown as "Voted" and those fixed by the President are shown as
"Charged".
629. The Budget Orders are accompanied by the final issues of "Demands of Grants" and "Works Machinery
and Rolling Stock Programmes", containing the detailed distribution of the Budget allotment made to railway
administrations for working expenses and Capital, Depreciation Fund, Development Fund, Open Line Works
(Revenue) and Accident Compensation, Safety and Passenger Amenities Fund expenditure. The Budget
allotment made to railway administration is intended to cover all charges including the liabilities for past
years to be paid during the year or to be adjusted in the accounts for it. It shall be operative until the close
of the financial year. Any unspent balance shall lapse and shall not be available for utilisation in the following
year.
630. In the event of the Budget Orders of the Railway Board not being received before the commencement
of the financial year, the railway administrations are empowered to incur expenditure pending the receipt of
the Budget Order on works which were in progress at the end of the previous financial year. All expenditure
incurred under this must be treated as a charge against the allotments eventually made for such works.
631. When the Budget Orders issued by the Railway Board show any reduction in the estimate originally
submitted to them, prompt measures should be taken by the railway administrations to limit the
expenditure to the amounts allotted and distributed by the Railway Board.
General Rules on Budget
632. The general rules on Railway Budget are contained in Chapter III of the Indian Railway Financial Code
to which reference may be made.
633. Planning for Surveys. As surveys for the initial step of investment planning, the programme of
surveys requires to be planned in advance and reviewed along with the investment decisions being taken in
the annual Works Programme meeting being held in Railway Board Office. A separate statement indicating
the surveys in progress and the new surveys proposed to be undertaken should be prepared and included in
the Railway Works Programme being submitted to the Railway Board. The need for each survey should be
clearly stated bringing out inter alia whether the same survey was proposed earlier and if so with what
results.
634. The cost of surveys or preliminary investigations to examine the feasibility and prospects of new line
constructions and other projects is charged to Demand No. 2 which is a Revenue Demand. All surveys
costing more than Rs. 1 lakh require prior approval of Parliament. If the construction of a project is
undertaken, the expenditure on the Survey is transferred to Capital or other appropriate heads by Credits to
Revenue, irrespective of the year in which the expenditure was originally incurred. The charges on surveys
are mostly made up of the pay and allowances of staff, cost of transport, cost of mathematical and other
instruments and camp and office equipage. The allowance for depreciation on materials likely to be left over
on completion of the surveys should be made on a scale justified by past experience. The Budget estimate
of surveys should provide for any adjustments necessary under the rules in respect of surveys pertaining to
a project the construction of which has been or is to be taken in hand. The revised estimates of surveys for
a year and the budget estimates for the ensuing year based on the decisions arrived at in the Works
Programme meeting should be prepared in respect of each survey in the following form and submitted in
duplicate so as to reach the Railway Board not later than 1st December of the year to which the ""revised
estimates" relate.
FORM NO. E-633
Demand No. 2-RAILWAYS (SURVEYS)
.............. RAILWAY
REVISED ESTIMATES FOR (1975-76) AND BUDGET ESTIMATE FOR (1976-77)
(To be despatched so as to reach the Railway Board by the 1st December, 1975 without fail)
(Figures in thousands of rupees)
Particulars

1
Total .

Total estimated Expenditure to Expendi-ture

or sanctioned end of 1973-74 for 1974-75
cost
2

Budget
Estimate
1975-76

Revised
Estimate
1975-76

Budget
Estimate
1976-77

Deduct.- Credits for

write back to Capital
Account of expenditure
on the following
surveys.
Net
Note.-Years have been shown in the form for purposes of illustration.
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