CHAPTER VI

INVESTMENT PLANNING AND WORKS BUDGET
Investment Planning and Works Programme Section

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 :-

(Figures in thousands of rupees)