Need to implement accounting reforms in railways: Niti Aayog -Governance Now

Need to implement accounting reforms in railways: Niti Aayog

The AR project witnessed a serious thrust only around December 2014/January 2015 when the railway ministry started implementing accrual accounting pilot in Ajmer division

GN Bureau | February 3, 2017

#Niti Aayog #Indian Railways #Accounting Reforms #Bibek Debroy

The urgent need of implementing Accounting Reforms (AR) in Indian Railways (IR) is widely recognized and accepted, said a Niti Aayog note.

The note by economist and Niti Aayog member Bibek Debroy and Niti Aayog official Kishore Desai said that the AR project in Indian Railways has been on the anvil since 2003 when it was first mentioned in the Railway Budget speech by the then minister of railways.
However, due to various reasons and lack of a “mission mode push‟, the project lingered on and could not be really implemented on-ground over the last so many years.

Read: Railways is best example for big bang reforms, says Suresh Prabhu

The AR project witnessed a serious thrust only around December 2014/January 2015 when the railway ministry started implementing accrual accounting pilot in Ajmer division and Ajmer group of workshops. The scope of the Ajmer division pilot was later expanded to include entire North Western Railway (NWR). The Budget speech 2015-16 articulated the AR vision and included Performance Costing and Outcome Budgeting modules besides developing financial accounts on accrual basis. In the budget speech of 2016-17, MR further announced implementing the project in a “mission mode” and “Mission Beyond book-keeping” was instituted. Pursuant to this, an implementing organization co-ordinated by the AR cell at the Railway Board got set up and RCF Kapurthala was identified for pilot implementation of accrual accounting.

Read: Railway budget is history. Here’s the rationale behind ‘budget reforms’

The note said that there has been a reasonable progress towards implementing AR on ground over the period December 2014 to December 2016. The pilot project of creating financial accounts on accrual basis at NWR is complete. The output documents that include Financial Statements (Balance sheet, cash flow and P&L account), significant accounting policies, notes to accounts & disclosures, accrual accounting implementation manuals etc. have been released and are being shared with all zonal railways for reference and implementation roll outs.

AR Project, as it is being undertaken, comprises three distinct modules. Module 1 relates to preparation of financial accounts of Indian Railways on “Accrual Basis”. This refers to preparing financial statements in a manner that a transaction is recognized in books of accounts at the time it happens. This is in contrast with the current practice of preparing accounts which recognizes a transaction in the event of cash flows.

Module 2 relates to development of a Performance Costing framework that could help assess costs of various activities (business-wise /service-wise etc.) undertaken by Railways in an objective manner.

The last module – Module 3, relates to Outcome Budgeting, which refers to a framework that links financial outlays with specific outcomes.

Read: Niti Aayog note on Status of Accounting Reforms in Indian Railways

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