Reply to the Queries Raised by the Short listed Firms.
	Q.1 How is accountancy organised within IR and what is the specific legal and financial status of IR?
	Ans. The organization of the Indian Railways is brought out in the section 'Indian Railways - Organization Structure' on the website www.accar.org. Accounts are prepared by the field units (called Railway divisions, workshops, etc.) under various Zonal Railways and consolidated as final accounts for each Zonal Railway. Accounts of Zonal Railways and other Units directly under Railway Board viz. Production Units and other activity units are further consolidated and compiled at Railway Board's level. Accounts of Indian Railways are audited by Comptroller and Auditor General of India who is a constitutional authority. The annual financial accounts, termed Appropriation accounts, are presented to the Parliament in prescribed formats. So far as legal status of IR is concerned, under the Constitution of India, the legislative power with respect to Railways vests exclusively in Parliament. The executive power also, with respect to Railways which shall be co-extensive with the legislative powerof Parliament, vests exclusively with the Government of India. The Railway Board which is the chief administrative body assisting the Minister of Railways and the Minister of State for Railways in the discharge of their functions has been vested with certain powers of the Central Government under the Indian Railway Act 1989. Apart from its functions as the top Railway executive body for the administration, technical; supervision and direction of the Railways, the Railway Board functions also as a Ministry of the Government of India and exercises all the powers of the Central Government in relation to the Railways. So far as financial status of IR is concerned, Finance Commissioner, Railways is a Member of Railway Board. Since, the separation of the Railway Finance from the General Finance since 1924, the Railway Board also exercises the powers of the Government of India in regard to Railway expenditure subject to the ultimate financial authority of the Minister of Railways and the Union Cabinet.
	Q.2 What amount of centralisation exists (regions, etc.)?
	Ans. The amount of centralization on Indian Railways corresponds to the scheme of delegation which is briefly as under :- i) Budget estimates are submitted from field units to zonal units to Railway Board. Conversely, budgetary grants/authorizations are made to Zonal Railways and other Units under Railway Board and from these to field Units (Divisions, Workshops, etc.). No expenditure, whether revenue or capital, can be incurred at any level of organization without corresponding budgetary authorization. ii) Staff policy including rules and related procedures on recruitment, pay, promotion, superannuation is decided at Board's level. Powers have been delegated for executing the policy at various levels of organization. iii) All policy issues are laid down at Board level with regard to procedure for execution of projects, procurement of materials, trains operations and technical matters. The procedures and instructions have been compiled in the form of codes for each functional department for convenience of reference. iv) Projects costing more than 50 lakhs are approved only at Board level. v) Accounts maintained by each field unit (i.e. Division, Workshop, etc.) are consolidated at Zonal Railways. These are further consolidated at Railway Board level including those of production units and other activity units directly under Railway Board.
	Q.3 Are there several levels of centralisation (Ministry budget, Board, different zones)?
	Ans. The levels of centralization have been brought out in the section 'Indian Railways - Organization Structure' on the website www.accar.org. Essentially each level represent centralization of:- (i) Budget, (ii) Accounts, (iii) Establishment matters. (iv) Material Management, (v) Works execution and supervision and (vi) General administration.
	Q.4 What information systems do IR use?
	Ans. Please refer to sub-section 'IT applications' to section 'Accounting framework' on website www.accar.org.
	Q.5 List of detailed statements supplied by the accountants and frequency of such reporting?
	Ans. A sample list of statements prepared by Accounting Department of IR is given below :- i) General cash abstract book - Monthly ii) Revenue Allocation Registration - Monthly iii) Capital Account Current - Monthly iv) Revenue Account Current - Monthly v) Final Revenue Account Current - Annually vi) Final Capital Account Current - Annually vii) Half-yearly Review of suspense balances - 6 Monthly viii) Debt Head Transactions - annually ix) Profit and Loss account - Annually x) Balance sheet - Annually xi) Block Account - annually Further, 'accounting framework' section of the website may be referred to for a detailed understanding of information reported by the accounting organization.
	Q.6 Are the GASAB standards similar to those of US GAAP or IAS.IFRS? In what way?
	Ans. GASAB website at www.gasab.gov.in may be visited.
	Q.7 Does the present accounting already provide cost and revenue data by activity and by route within each of the major activities (Passenger, Freight, etc.)?
	Ans. The accounting framework Section of the Website www.accar.org may be referred to. The present system of accounting classification do provide for a scheme of recording expenditure and earning data by activity type, though not in the manner as envisaged in the Terms of Reference. However, the existing system do not allow route-wise and train-wise compilation of cost and revenue data.
	Q.8 Is the separation of the accounts of the five major business segments intended to go as far as to spin off the business units as individual subsidiaries, or is it merely a matter of separating the accounts?
	Ans. The separation of accounts of the 5 major business segments is intended to facilitate preparation of final accounts for each segment in order to arrive at informed policy decisions for a particular segment. No further spin-off of the business units as individual subsidiaries is intended at this stage.
	Q.9 Is the provision of services, such as manufacturing and maintaining the rolling stock, and operating the trains, already allocated to different business units and/or are these services already invoiced by intra-railway billing?
	Ans. Manufacturing of rolling stock is carried out by departmentally run production units, directly under Railway Board. The PUs are expected to manufacture rolling stock for IR at least cost possible so that their impact on rail tariff is very low. The manufactured stock of these units is supplied to the Zonal Railways which run train operations. Manufacturing units, termed Production Unit on Indian Railways, do invoice recipient railways for the Rolling Stock delivered. So far as maintenance of Rolling Stock is concerned, the same is undertaken by the Zonal Railway owning the stock. Maintenance work undertaken for other Zonal Railways are invoiced for expenditure incurred thereon through inter-railway transfer. So far as train operations are concerned, Zonal Railways are responsible for operating trains within their territorial jurisdiction. Therefore, other Zonal Railways are not billed for this activity. There, however, does exist a system of apportionment of earnings, collected at originating station or elsewhere, amongst Zonal Railways on which traffic moves.
	Q.10 What is the difference between "suburban operation" and the "suburban rail system"?
	Ans. The 'Suburban Operation' denotes train operations in suburban section of Indian Railways while the 'suburban Rail System' includes infrastructure assets consisting of track, signaling and overhead traction, maintenance facilities for suburban stock and suburban operations.
	Q.11 Regarding the allocation of common costs and in particular shared infrastructure costs, is there a plan to set up a contract system for all inter-sector and business unit relations, based upon market prices binding towards third parties?
	Ans. The issue of allocation of common costs, particularly shared infrastructure costs, is to be addressed, for the purpose of building-in such sharing in the accounting system itself, from the angle of separating accounts for the different segments as envisaged in the Terms of Reference so as to arrive at a reasonably accurate estimation of cost and revenue data for a particular segment. There is no question of setting up a contract system involving market prices and third parties.
	Q.12 For the suburban network of Mumbai, do IR want to go as far as spinning it off into a subsidiary or is cost accounting for each of the networks enough?
	Ans. Terms of Reference do not envisage spinning-off of suburban network into a subsidiary. The TOR involve evolving a costing system specifically designed for this network. However, for the new suburban developments in New Mumbai areas, a separate Special Purpose Vehicle (SPU) titled as Mumbai Rail Vikas Corporation (MRVC) has been created under the control of Ministry of Railways. This is a different suburban entity.
	Q.13 Is the suburban network of Mumbai already subsidised? If so what level of subsidy and is it required to document the usage of subsidy moneys?
	Ans. The suburban network of Mumbai is subsidized. Level of subsidy is estimated at Rs.80 crores in 2003-03 for the Central Railway segment. It is required that a documentation framework is created to account for the usage of subsidy money?
	Q.14 To improve the IR's overall management and its performance, will every activity be required to produce a separate account or can it be envisaged to rely on strict management rules published in a manual of procedures and internal controls?
	Ans. The terms of reference may please be referred to in this regard. The separation of account is envisaged only for 5 segments mentioned therein. However, train-wise and route-wise compilation of costs and revenues is also envisaged so as to facilitate tariff decisions. Even under this scenario, detailed instructions for each aforementioned segment of rail system will be required to be compiled for dissemination to various levels of management to facilitate monitoring of the activities accordingly. The need for creation of Project Centres within the 5 business segments will also be examined.
	Appendix A, Section 4 - Scope of the service and deliverables from the consultant
	Q.1 Is consultant expected to present a new template for financial reporting and are there any regulatory constraints on this?
	Ans. Consultant is expected to present a new template for financial reporting. Since Indian Railways are a departmental organization under Government of India, it has to subscribe to Government accounting rules and procedures. A brief description of such rules and procedures is available at website http://cga.nic.in. Comptroller & Auditor General of India (http://cag.nic.in) is responsible for carrying out audit on accounts of Indian Railways. Annual final accounts of Railway are also presented to Parliament and are subject to scrutiny by Parliamentary Committees like Public Accounts Committee, Estimates Committee of theParliament, Railway Convention Committee of the Parliament, Standing Committee of the Parliament for Railways, etc. Directions given to Railways by Parliamentary Committees in respect of accounting policies, format and procedures for maintenance of accounts is binding in nature.
	Q.2 Is it necessary to reform the present system in respect of revenue accounting?
	Ans. It is not envisaged to write procedure manual for inventory controls. However, the accounting for stores/spare parts has to facilitate maintenance of separate accounts for each segment of rail system while conforming to existing scheme of inventory management. The existing scheme is codified in twoparts covering detailed procedure for estimation of quantity of individual item, procurement function, receipt and issue of stores and items to indenting departments, custody and upkeep of storesand disposal of redundant items/scrap.
	Q.3 Is it required to write procedure manuals for inventory control as part of the accounting for stores, spare parts?
	Ans. It is not envisaged to write procedure manual for inventory controls. However, the accounting for stores/spare parts has to facilitate maintenance of separate accounts for each segment of rail system while conforming to existing scheme of inventory management. The existing scheme is codified in twoparts covering detailed procedure for estimation of quantity of individual item, procurement function, receipt and issue of stores and items to indenting departments, custody and upkeep of storesand disposal of redundant items/scrap.
	Q.4 Regarding the accounting practices of the production units, is the existing accounting system being challenged?
	Ans. The accounting practices followed by Production Units of Indian Railways are to be reviewed with regard to their conformity to internationally accepted accounting standards as well as accounting standards being finalized by GASAB.
	Q.5 Regarding the accounting codes and governance of accounting by means of the codes, is such governance effected via a single accounting standard?
	Ans. At present, maintenance of accounts on Indian Railways at various level of organization (Divisions and workshops, Zonal Railways, Production Units, other units under Indian Railways) is governed by rules and procedures codified in manuals and codes compiled and circulated for this purpose. Essentially, the basic system of accounting in form of recording the transactions and preparation of periodic accounting statements as well as final accounts is uniform for each level of organization. An over view of the existing system is available in the 'accounting framework' section of our website www.accar.org.
	Q.6 Is the financial management information system an integrated system?
	Ans. The sub-section 'IT Applications' under Section 'Accounting Framework' may be referred to on our website www.accar.org, particularly the write up on AFRES and PRIME.