O.R. -
Operating Ratio in Indian Railways
Likely
Questions:
1. What is Operating Ratio ? How it is calculated ?
2. Computation of the Operating
Ratio from the set of figures given in the problem.
3.Is OR, best financial ratio to show the performance of Railways ? If
answer is No, what is the reason and which one is the alternative one ?
4. Can we extends the O.R to the Divisions in replacement of PEI
(Performance Efficiency Index) ? If so what is the mechanism and the benefits
accrue to Railways ?
Now
let's check the answers:
1. What is
Operating Ratio ? How it is calculated ?
ü Codal provisions - Para 308 & 434 of I.Rly.Finance Code.
ü Definition of O.R.:
Percentage of Gross Working Expenses to Gross Earnings of any accounting year.
In general, Operating ratio is the number of rupees
spent to earn every 100 Rupees.
ü If O.R. is less than 100 = Organisation is in
profits.
ü If O.R. is more than 100 =
Organisation is in losses.
ü Definition of Gross
Working Expenses (GWE): Ordinary Working Expenses-OWE (Demands 3
to 13) plus Appropriations to DRF-Depreciation Reserve Fund and Pension Fund. Note: True expenses in an
accounting period whether or not actually disbursed. That means excludes Suspense.
ü Definition of Gross
Earnings: Coaching Earnings (Abstract X) + Goods Earnings (Abstract Y) + Sundry
other Earnings (Abstract Z) Note: true
or accrued earnings in an accounting period whether or not actually realised.
That means excludes Suspense.
ü Always considered Apportioned Earnings instead
of Originating Earnings.
Gross Working
Expenses
ü O.R =
_______________________ x 100
Gross
Earnings
ü There is no ideal
Operating Ratio for Indian Railways. In rail road sector,
an operating ratio of 80 or lower is considered desirable. However lower O.R. helps in generating internal resources for
meeting requirement of Plan Expenditure on Safety (RSF), Amenities to
Passengers & Staff (D.F) and other Capital investments such as laying of
new lines, acquisition of Rolling Stock etc (Capital Fund).
ü In the year 2005,
Indian Railways, changed its accounting policy for the lease charges. The lease
charges have been broken into two parts - capital and revenue. While revenue
has been charged to working expenses (Demand No.9G), capital portion is
separately provided for in the capital budget ( Plan Head 2200-Leased assets - Payment of capital
component of lease charges to IRFC etc.). This has resulted in the reduction of working expenses and the
operating ratio.
ü Measures to be taken
to achieve the Lower/efficient O.R. are
A) maximizing the traffic earnings
inter-alia include rationalization of fare and freight tariff; effective
marketing strategies to capture more and more traffic; creation of additional
capacity and optimum utilization of the existing rail infrastructure.
B) contain the expenditure through
diverse means including strict economy and austerity measures; improved
man-power planning; better asset utilization and inventory management;
optimizing the fuel consumption etc.
ü The Best ever O.R of
Indian Railways was 74.7 % in 1963-64.
ü Comparing O.R of
Indian Railways with other countries ' railways systems - Not possible due to different computation
methodologies across different countries thus reducing validity of comparison
of such statistical figures.
Glossary
- Excerpts
from Finance Code Para No.308 -
better to understand Operating Ratio and Railway finances.
|
Credit Side |
Debit Side |
Net of Credit & Debit |
|
(i) Coaching
Earnings (less refunds) |
(x)
Ordinary Working Expenses = Expenses booked under final heads, excluding
appropriation to DRF & Pension Fund |
|
|
(ii) Goods
Earnings (less refunds) |
(xi)
Appropriation to Depreciation Reserve Fund. |
|
|
(iii) Traffic
Earnings = (i)+(ii) |
(xii)
Appropriation to Pension Fund. |
|
|
(iv) Sundry
Other Earnings (less refunds)=Other than Traffic Earnings. |
|
|
|
(v) Gross Earnings = (iii)+(iv) = true or accrued earnings in
an accounting period whether or not actually realized. |
(xiii)
Gross
Working Expenses = (x)+(xi)+(xii)
= True expenses in an accounting period whether or not actually disbursed. |
(xviii) Net Earnings
=(v) - (xiii) O.R = (Xiii) /(v) x
100 |
|
(vi) Suspense. |
(xiv)
Suspense. |
|
|
(vii) Gross
Receipts = (v)+(vi) =
Earnings actually realized during an accounting period. |
(xv) Gross Expenditure = (xiii) + (xiv) = Working Expenses
actually disbursed during an accounting period. |
|
|
(viii)Misc.
Receipts = Guarantee recoverable from State Govts. + Other Misc. Receipts,
such as Govt. share of surplus profits, sale of land of subsidized companies, receipts from
surcharge on Passenger fares, etc. |
(xvi)
Misc. expenditure = Surveys + Land for subsidized companies; subsidy + other Miscc Railway expenditure, Appropriations to
Pension Fund relating to Railway Board and Miscc establishments booked under grants 1
& 2 and Accident Compensation, Safety and Passenger Amenities Fund and OLWR
expenditure, and payments to worked lines. |
|
|
(ix) Total
Revenue Receipts = (vii)+(viii). |
(xvii)
Total Revenue Expenditure = (xv)+(xvi). |
(xix) Net Receipts = (ix) - (xvii). |
|
(xix) Net Receipts
= (ix) - (xvii). |
(xx) Payment to General Revenues (Dividend) |
(xxi) Surplus = (xix) -
(xx) (shortfall
if the figure is negative) |
Note:
From 2017-18 onwards, the Railway Budget has merged with General Budget. Hence
there is no Dividend payable. Hence Net Receipts/Net Revenue becomes Surplus.
Appropriation
of Surplus: The surplus will be appropriated to
Development Fund, Railway Safety Fund, Capital Fund and latest created fund
" Railway Liability Reserve Fund.
ü Comparing O.R of different Zonal Railways: It is not possible to compare the O R of one
Zonal Railway with another Zonal Railway due to several factors such as Floods,
Accidents and other special factors.
Hence it is better to compare OR of particular Zonal Rly from Year -
Over - Year (YOY) basis.
In simple
terms , the Operating Ratio is calculated based on the following glossary terms
only
|
Denominator |
Numerator (Gross
Working Expenses) |
|
1.Gross Earnings |
1.OWE - Ordinary Working Expenses
i.e., 3 to 13 Demands |
|
|
2. Appropriation to DRF &
Pension Fund i.e., D.No.14 |
Formulae of
OR = Gross Working Expenses \ Gross Earnings x 100
Forget the
following Glossary terms of calculation of O.R.
|
Never taken the following items for calculation of Operating Ratio |
|
|
Earnings Side |
Expenditure side |
|
Suspense |
Suspense |
|
Gross Receipts |
Gross Expenditure |
|
Misc. Receipts |
Misc. Expenditure |
|
|
Dividends paid to Gen. Revenues |
|
|
Appropriation to D.F, Safety Fund,
Capital Fund |
2. Working out the following from the set of figures
as given below.
i) Operating Ratio ii) Net Receipts iii ) Surplus/Shortfall
|
Details |
Amount(In Crores of Rs.) |
|
1. Gross Receipts |
1400 |
|
2. Suspense - Earnings |
150 |
|
3. Misc. Receipts |
50 |
|
4. Expenditure (Actual basis) |
800 |
|
5. Suspense - expenses |
(- ) 50 |
|
6. Appropriation to DRF |
65 |
|
7.Appropriation to Pension Fund |
85 |
|
8. Misc. Expenditure |
25 |
|
9.Dividends payable |
75 |
|
10. Appropriation to D.F. |
150 |
|
11. Appropriation to R.S.F. |
100 |
|
12. Appropriation to Capital Fund |
150 |
Solution:
i) Operating Ratio
Formulae of
OR = Gross Working Expenses / Gross Earnings x 100
Gross Earnings = Gross Receipts minus Suspense
Hence
1400 - 150 = 1250 is Gross
Earnings.
Gross Working Expenses = Ordinary
Working Expenses(OWE) + App. to DRF & P.F
Ordinary Working Expenses ( OWE) =
Actual Expenditure minus Suspense
= 800 - (-)
50 = 850 (Note: Minus of Minus = Plus)
Gross Working Expenses = OWE + App. to DRF &
Pension Fund.
Gross Working Expenses = 850
+ 65 + 85 = 1000
Hence O.R . = 1000 / 1250 x 100 = 80 %
ii) Net Revenue
Net Revenue = Total Revenue
Receipts - Total Revenue Expenditure
Total Revenue Receipts = Gross Receipts + Misc
Receipts.
= 1400 + 50 = 1450
Total Revenue Expenditure = Gross Expenditure +
Misc. Expenditure
Gross Expenditure = 800 + 65 + 85 = 950 and Misc.
Expenditure = 25
Total Revenue Expenditure =
950 + 25 = 975
Net Revenue = Total Revenue Receipts - Total
Revenue Expenditure
Net Revenue = 1450 -
975 =
475
iii) Surplus/Shortfall
Surplus = Net Revenue - Dividends Payable
= 475 -
75 = 400
Surplus = 400
Note: Appropriation
to Development Fund, Railway Safety Fund & Capital Fund will not be
considered for calculation of Operating Ratio/Net Revenue/Surplus.
3. Is OR,
best financial ratio to show the performance of Railways ? If answer is No,
what is the reason and which one is the alternative one ?
ü It is true, that the
Operating Ratio itself is not a perfect indicator for judging the efficiency of
Indian Railways.
ü Let's see the below
hypothetical illustration of two Railways.
|
Rly. |
Capital at Charge |
Gross Earnings |
Gross Working expenses |
O.R. |
ROR- Rate of Return/ROCE-Return on
Capital Employed |
|
A |
1000 |
200 |
150 |
75 % |
5 % i.e., Rs.50 profit on Capital of
Rs.1000 |
|
B |
5000 |
2000 |
1600 |
80 % |
8 % i.e., Rs.400 profit on Capital of
Rs. 5000 |
ü Considering the
Operating Ratio as efficient indicator, Railway "A" is more efficient
than Railway "B". But taking
ROR/ROCE i.e., indicator of utilisation
of Capital, Railway "B" is more efficient than Railway "A".
ü If so, as mentioned
in Para 511 of Indian Railways Administration and Finance - An
Introduction, Return on Capital i.e., percentage of (revenue) surplus to Capital-at-charge is the true indicator to judge the financial performance of
Indian Railways.
ü Revenue Surplus = Net Receipts (actual basis) after adjusting misc receipts and
misc expenditure and payment of Dividend to General Revenues. (item xxi of para 308-Finance Code)
ü Capital at Charge means "the Central Government's investment in the Railways
by way of Loan Capital and value of the assets created there from. (item xxii of para 308-Finance Code)
ü To sum up, the combination of above two Ratios will be
considered to evaluate the performance of the Railways instead of Operating
Ratio alone.
ü Operating Ratio is helpful for comparing the Railways'
efficiency of Year-over-year(YOY) as well as evaluating the Inter Zonal
comparison among different Zonal
Railways in India.
4. Can we extends the O.R to the Divisions in replacement of PEI
(Performance Efficiency Index) ? If so what is the mechanism and the benefits
accrue to Railways ?
DIVISIONS and PEI - Performance Efficiency Index
ü At present, PEI is
the performance indicator in the Divisions ( like OR-Operating Ratio for Zonal
railways)
ü As of today, OR
is not being calculated for Divisions and thus they cannot be treated as
“Profit Centers”.
ü PEI = a ratio of Demands 3 to 12 and
Originating Earnings .
ü That means
unlike Operating Ratio, Appropriation to DRF and Pension Fund will not be
considered for calculating PEI. Also
Apportioned Earnings not considered for calculating PEI.
Demands 3 to 12
ü PEI of Division
= _______________________ x
100
Originating Earnings
|
Operating
Ratio - OR |
Performance
Efficiency Index-PEI |
|
1. D.No. 3 to
13 considered |
1. D.No. 3 to
12 only considered. |
|
2. Considered
Apportioned Earnings |
2.
Considered Originating Earnings. |
|
3.
Appropriation to DRF & Pension Fund are considered. |
3.
Appropriation to DRF & Pension Fund are not considered. |
|
4. Calculated
for Zonal Railways |
4. Calculated
for Divisions |
|
5. Formulae =
GWE-Gross Working Expenses /Gross Earnings x100. GWE = OWE +
Appropriation to DRF & Pension Fund OWE= 03 to 13
Demands. |
5. Formulae=
Demands 03 to 12/ Originating Earnings x 100 |
Note:
In some Zonal Railways like SCR, D.No.13 also included for calculating PEI.
So, the
drawbacks and their solutions for computing Operating Ratio of their respective
Divisions are
1.
Appropriation to DRF -
|
Appropriation
to DRF from the Division can be computed as: Capital
at Charge on the Division / Capital at Charge on the Zone x Appropriation to DRF for the Zone. |
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2. Appropriation to Pension Fund
- It would be possible to calculate the
Appropriation to Pension Fund from the Division based on the Pensionable
employees on Division /Pensionable employees on the Zone x Appropriation to Pension Fund. |
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3.
Apportioned Earnings - Right now, based on the proportionate distance of
consignment or passenger travelled over the Zonal Railways, the apportioned
earnings can be calculated for the Zonal Railways. The same mechanism will
apply for calculate of apportioned earnings for the Divisions based on
distances covered among Divisions within a Zonal Railway. With the help of Computers, it can be very
easy exercise.
- If we address the
above drawbacks in correct approach as stated above, Divisions also can
able compute Operating Ratio (OR) and became Profit Centers similar to
Zonal Railways. Because,
" What cannot be measured, cannot be managed" By Peter Drucker/ Deming
"If you cannot
measure it, you can’t improve it" By Lord Kelvin
*****
2020-21 Railway Revenue Budget
- Financials
|
SN |
Receipts |
Amount (Rs. in Crores) |
Percentage |
|
SN |
Expenditure |
Amount (Rs. in Crores) |
Percentage |
|
1 |
Coaching Earnings |
67500 |
30 % |
|
1 |
Ordinary Working Expenses |
163157.17 |
75 % |
|
2 |
Goods Earnings |
147000 |
65 % |
|
2 |
Appropriation to DRF |
800 |
1 % |
|
3 |
Sundry Earnings |
11013 |
5 % |
|
3 |
Appropriation to Pension Fund |
53160 |
24 % |
|
4 |
Gross Earnings (1+2+3) |
225513 |
100 % |
|
4 |
Gross Working Expenses
(1+2+3) |
217,117.17 |
100 % |
|
5 |
Suspense |
100 |
|
|
5 |
Suspense |
-
404.17 |
|
|
6 |
Gross Receipts (4+5) |
225613 |
|
|
6 |
Gross Expenditure (4+5) |
216713 |
|
|
7 |
Misc Receipts |
300 |
|
|
7 |
Misc. Expenditure |
2700 |
|
|
8 |
Total Receipts (6+7) |
225913 |
|
|
8 |
Total Expenditure |
219413 |
|
Net Revenue = Total Receipts
- Total Expenditure
Net Revenue = 225913 - 219413
Net Revenue = 6500
Rs. 6500 Crores Net Revenue
is appropriated to
1.
Development
Fund - Rs. 1500 Crores
2.
RRSK -
Rashtriya Rail Sanraksha Kosh - Rs. 5000 Crores
Nil appropriations to Capital
Fund and RSF - Railway Safety Fund
Operating Ratio = Gross Working
Expenses / Gross Earnings x 100
Operating Ratio = 217117.17 /
225513 x 100
Operating Ratio = 96.28 %
Highest & Lowest Operating
Ratio of Zonal Railways
|
Zonal Railway |
OR |
Rank |
|
Metro Railway,
Kolkata |
250.3 |
HIghest |
|
Eastern
Railway, Kolkata |
171.1 |
Second Highest |
|
East Coast
Railway, Bhubaneswar |
50.9 |
Lowest |
|
South East
Central Railway, Bilaspur |
52.3 |
Second Lowest |
(2016 Books & Budget- Without Books -5 marks)
Books & Budget 2016
(Without Books) - Operating Ratio Problem
(compulsory question 20
marks)
Qn. Given below
are the financial results of Railways for a financial year
(All figures in Rs. Crores)
|
SN |
Particulars |
Amount (in crores of Rs.) |
|
1 |
Gross Receipts |
12005 |
|
2 |
Suspense earnings |
3 |
|
3 |
Misc receipts |
101 |
|
4 |
Ordinary Working Expenses |
8812 |
|
5 |
Suspense expenses |
19 |
|
6 |
Appropriation to DRF |
473 |
|
7 |
Appropriation to Pension Fund |
1948 |
|
8 |
Misc Expenditure |
7 |
|
9 |
Dividends payable |
228 |
Work out the following
from the above figures:
A. Operating Ratio
B. Net Revenue
C. Excess / Shortfall
D. Total Working Expenses
Solution:
Ready reckoner for
calculation of Operating Ratio
(All
figures in Rs. Crores)
|
SN |
Particulars |
formulae |
Amount |
SN |
Particulars |
formulae |
Amount |
Finding |
|
|
1. |
Coaching Earnings (less refunds) |
10 |
OWE - Ordinary Working Expenses |
8812 |
|||||
|
2. |
Goods Earnings (less refunds) |
11 |
Appropriation to DRF |
473 |
|||||
|
3 |
Traffic Earnings |
(1 + 2) |
12 |
Appropriation to Pension Fund |
1948 |
||||
|
4 |
Sundry Other Earnings (less
refunds) |
||||||||
|
5 |
Gross Earnings |
(3 + 4) |
12002 |
13 |
Gross Working Expenses |
(10 + 11 + 12) |
11233 |
O.R = 13/5 x 100= 11233/ 12002 X 100 = 93.59 % |
|
|
6 |
Suspense |
3 |
14 |
Suspense |
19 |
||||
|
7 |
Gross Receipts |
(5 + 6) |
12005 |
15 |
Gross Expenditure |
(13 + 14) |
11252 |
||
|
8 |
Miscellaneous Receipts |
101 |
16 |
Miscellaneous Expenditure |
7 |
||||
|
9 |
Total Revenue Receipts |
(7 + 8) |
12106 |
17 |
Total Revenue Expenditure |
(15 + 16) |
11259 |
Net Revenue/Net
Receipts = 9 - 17 = 12106-11259= 847 |
Excess /Surplus = Net
Revenue/Net Receipts minus Dividends payable.
Excess / Surplus =
847-228 = 619
Hence Answers are
1) Operating Ratio = 93.59 % (
GWE/Gross Earnings x 100 = 11233/12002 X 100)
2) Net Revenue = 847 Crores of Rs. (Total Revenue Receipts - Total Revenue Expenditure = 12106-11259)
3) Excess = 619 Crores
of Rs. (Net Revenue -
Dividends payable = 847
- 228)
4) Total Working Expenses/Gross Working
Expenses = 11233 Crores of Rs.
(OWE + Appn to DRF & Pension Fund=8812 +473 + 1948 )
*****
Books & Budget 1982 (With
Books) - Operating Ratio Problem
Qn. Work out the
Operating Ratio of Railway "A" from the following data.
(All figures in Rs. Crores)
|
Particulars |
Amount |
|
Capital at charge |
702.30 |
|
Passenger earnings |
125.80 |
|
Other coaching earnings |
17.50 |
|
Goods earnings |
158.30 |
|
Sundry other earnings |
11.50 |
|
Suspense |
- 1.80 |
|
Ordinary Working Expenses (OWE) |
269.80 |
|
Suspense |
- 0.30 |
|
Appropriation to DRF |
52.08 |
|
Appropriation to Revenue Fund |
15.25 |
|
Payment to General Revenues |
5.80 |
What Additional
information is required to work out a surplus or shortfall ?
Solution:
Ready reckoner for
calculation of Operating Ratio
(In
Rs. of Crores)
|
SN |
Particulars |
formulae |
Amount |
SN |
Particulars |
formulae |
Amount |
Finding |
|
|
1. |
Coaching Earnings (less refunds) |
143.30 |
10 |
OWE - Ordinary Working Expenses |
269.80 |
See Notes for calculation of OWE |
|||
|
2. |
Goods Earnings (less refunds) |
158.30 |
11 |
Appropriation to DRF |
52.08 |
||||
|
3 |
Traffic Earnings |
(1 + 2) |
301.60 |
12 |
Appropriation to Pension Fund |
0.00 |
|||
|
4 |
Sundry Other Earnings (less
refunds) |
11.50 |
|||||||
|
5 |
Gross Earnings |
(3 + 4) |
313.10 |
13 |
Gross Working Expenses |
(10 + 11 + 12) |
321.88 |
O.R = 13/5 x 100=
321.88/313.10 x 100 = 102.80 % |
|
|
6 |
Suspense |
- 1.80 |
14 |
Suspense |
- 0.30 |
||||
|
7 |
Gross Receipts |
(5 + 6) |
311.30 |
15 |
Gross Expenditure |
(13 + 14) |
321.58 |
||
|
8 |
Miscellaneous Receipts |
16 |
Miscellaneous Expenditure |
||||||
|
9 |
Total Revenue Receipts |
(7 + 8) |
17 |
Total Revenue Expenditure |
(15 + 16) |
Net Revenue/Net Receipts = 9 - 17 = |
Surplus = Net Revenue/Net
Receipts minus Dividends paid.
Surplus =
Hence Answers are
1) Operating Ratio =
102.80 %
2) Additional information
such as Misc. Receipts & Misc Expenditure is required to find out surplus
or shortfall.
Notes:
1. Coaching Earnings =
Passenger earnings + other coaching earnings = 125.80 +17.50 = 143.30
Books & Budget 2006 (Without Books) -
Operating Ratio Problem (compulsory) - 20 marks
Qn. Given below are the financial results of two
Railway Zones A & B:-
(All figures in Rs. Crores)
|
Details |
A |
B |
|
Originating Earnings |
5000 |
6000 |
|
Apportioned Earnings |
3800 |
4000 |
|
Traffic Suspense |
75 |
100 |
|
Ordinary Working Expenses (Demands
3 to 13) |
2800 |
3200 |
|
Appropriation to DRF |
225 |
450 |
|
Appropriation to Pension Fund |
120 |
310 |
Calculate the Operating
Ratio of the above two zones. What are your inferences regarding the performance of the above
railways ?
Solution:
Ready reckoner for
calculation of Operating Ratio of Zonal Railway A
|
SN |
Particulars |
formulae |
Amount |
|
SN |
Particulars |
formulae |
Amount |
Finding |
|
1. |
Coaching Earnings (less refunds) |
|
|
10 |
OWE - Ordinary Working Expenses |
|
2800 |
|
|
|
2. |
Goods Earnings (less refunds) |
|
|
11 |
Appropriation to DRF |
|
225 |
|
|
|
3 |
Traffic Earnings |
(1 + 2) |
|
12 |
Appropriation to Pension Fund |
|
120 |
|
|
|
4 |
Sundry Other Earnings (less
refunds) |
|
|
|
|
|
|
|
|
|
5 |
Gross Earnings |
(3 + 4) |
3800 |
13 |
Gross Working Expenses |
(10 + 11 + 12) |
3145 |
O.R = 13/5 x 100= 3145/3800x100 = 82.76 % |
|
|
6 |
Suspense |
|
75 |
14 |
Suspense |
|
0 |
|
|
|
7 |
Gross Receipts |
(5 + 6) |
3875 |
15 |
Gross Expenditure |
(13 + 14) |
3145 |
|
|
|
8 |
Miscellaneous Receipts |
|
0 |
16 |
Miscellaneous Expenditure |
|
0 |
|
|
|
9 |
Total Revenue Receipts |
(7 + 8) |
3875 |
17 |
Total Revenue Expenditure |
(15 + 16) |
3145 |
Net Revenue/Net Receipts = 9 - 17 = 3875-3145 = 730 |
Ready reckoner for
calculation of Operating Ratio of Zonal Railway B
|
SN |
Particulars |
formulae |
Amount |
|
SN |
Particulars |
formulae |
Amount |
Finding |
|
1. |
Coaching Earnings (less refunds) |
|
|
10 |
OWE - Ordinary Working Expenses |
|
3200 |
|
|
|
2. |
Goods Earnings (less refunds) |
|
|
11 |
Appropriation to DRF |
|
450 |
|
|
|
3 |
Traffic Earnings |
(1 + 2) |
|
12 |
Appropriation to Pension Fund |
|
310 |
|
|
|
4 |
Sundry Other Earnings (less
refunds) |
|
|
|
|
|
|
|
|
|
5 |
Gross Earnings |
(3 + 4) |
4000 |
13 |
Gross Working Expenses |
(10 + 11 + 12) |
3960 |
O.R = 13/5 x 100= 3960/4000 x 100 = 99 % |
|
|
6 |
Suspense |
|
100 |
14 |
Suspense |
|
0 |
|
|
|
7 |
Gross Receipts |
(5 + 6) |
4100 |
15 |
Gross Expenditure |
(13 + 14) |
3960 |
|
|
|
8 |
Miscellaneous Receipts |
|
0 |
16 |
Miscellaneous Expenditure |
|
0 |
|
|
|
9 |
Total Revenue Receipts |
(7 + 8) |
4100 |
17 |
Total Revenue Expenditure |
(15 + 16) |
3960 |
Net Revenue/Net Receipts = 9 - 17 = 4100 - 3960 = 140 |
Inferences:
|
Details |
A |
B |
Inferences |
|
Apportioned Earnings |
3800 |
4000 |
|
|
Ordinary Working Expenses (Demands
3 to 13) |
2800 |
3200 |
|
|
Ratio of OWE to Apportioned Earnings |
2800/3800 x 100 = 74 % |
3200/4000 x 100 = 80 % |
Control Over Expenditure is more
evident in case of Zonal Railway A compare to Zonal Railway B |
|
Appropriation to DRF |
225 |
450 |
Considering the depreciation, the
Zonal Railway B is having more assets. But apportioned earnings of both
railways almost the same. That means utilization of Assets is not
optimum in case of Zonal Railway B |
|
Appropriation to Pension Fund |
120 |
310 |
Considering the appropriations to
Pension Fund, Zonal railway B has more retired personnel than Zonal Railway
A. But the apportioned earnings of both railways are almost the
same. |
|
Operating Ratio |
82.76 % |
99 % |
Considering the above facts, Zonal
Railway B is less efficient than Zonal Railway A. |
Finally, Zonal Railway B
should have taken steps for
utilization of their assets more efficiently and control their expenditure
(OWE) to reduce the Operating Ratio.
******
Books & Budget 2005 (Without Books)
- Operating Ratio Problem
Qn. Work out following from the set of figures given below.
A) Operating Ratio
B) Net Receipts
C) Surplus/shortfall
(All figures in Rs. Crores)
|
Particulars |
Amount |
|
Gross Receipts |
1908 |
|
Suspense earnings |
186 |
|
Misc receipts |
57 |
|
Actual expenditure |
1278 |
|
Suspense expenses |
48 |
|
Appropriation to DRF |
67 |
|
Appropriation to Pension Fund |
81 |
|
Misc Expenditure |
23 |
|
Dividends payable |
73 |
|
Appropriations to DF |
144 |
|
Appropriations to RSF |
98 |
|
Appropriations to Capital Fund |
144 |
Solution:
Ready reckoner for calculation of Operating Ratio
|
SN |
Particulars |
formulae |
Amount |
|
SN |
Particulars |
formulae |
Amount |
Finding |
|
1. |
Coaching Earnings (less refunds) |
|
|
10 |
OWE - Ordinary Working Expenses |
|
1230 |
See Notes for calculation of OWE |
|
|
2. |
Goods Earnings (less refunds) |
|
|
11 |
Appropriation to DRF |
|
67 |
|
|
|
3 |
Traffic Earnings |
(1 + 2) |
|
12 |
Appropriation to Pension Fund |
|
81 |
|
|
|
4 |
Sundry Other Earnings (less refunds) |
|
|
|
|
|
|
|
|
|
5 |
Gross Earnings |
(3 + 4) |
1722 |
13 |
Gross Working Expenses |
(10 + 11 + 12) |
1378 |
O.R = 13/5 x 100= 1378/1722 X 100 = 80.02 % |
|
|
6 |
Suspense |
|
186 |
14 |
Suspense |
|
48 |
|
|
|
7 |
Gross Receipts |
(5 + 6) |
1908 |
15 |
Gross Expenditure |
(13 + 14) |
1426 |
|
|
|
8 |
Miscellaneous Receipts |
|
57 |
16 |
Miscellaneous Expenditure |
|
23 |
|
|
|
9 |
Total Revenue Receipts |
(7 + 8) |
1965 |
17 |
Total Revenue Expenditure |
(15 + 16) |
1449 |
Net Revenue/Net Receipts = 9 - 17 = 1965 - 1449 =516 |
Surplus = Net Revenue/Net Receipts minus Dividends paid.
Surplus = 516 -
73 = 443
Hence Answers are
1) Operating Ratio =
80.02 %
2) Net Receipts = 516
3) Surplus = 443
Notes:
1 ) Finding OWE - Ordinary Working Expenses
OWE + Suspense = Actual Expenditure (similar to GWE +
Suspense = Gross Expenditure)
OWE + 48 = 1278
OWE = 1278-48 = 1230
2 ) However Surplus 443 had a balance of 57, after
i) appropriation to DF - 144 }
ii) appropriation to RSF - 98 } Total of 144+98+144 = 386
only against surplus 443
iii) appropriation to Capital Fund - 144 }
Operating Ratio
(O.R) - Practical problem - 20 marks
- Compulsory
2012 year optional Books & Budget (without Books)
Question paper
1. Given below are the financial results of Railways for
the years 2007-08 and 2008-09.
Figures in Crores of Rs.
|
Particulars |
2007-08 |
2008-09 |
|
Gross Earnings |
71645 |
79837 |
|
Traffic Suspense |
75 |
25 |
|
Gross Traffic Receipts |
71720 |
79862 |
|
Miscellaneous Receipts |
1557 |
1797 |
|
Ordinary Working Expenses-OWE |
41033 |
54349 |
|
Appropriation to DRF |
5450 |
7000 |
|
Appropriation to Pension Fund |
7979 |
10490 |
|
Miscellaneous Expenditure |
480 |
645 |
|
Net Revenue |
18334 |
9174 |
|
Dividend Paid |
4903 |
4718 |
a) From the
above figures, calculate the Operating Ratio for 2007-08 and 2008-09.
b) Comment
on performance of the railway in 2008-09 compared to 2007-08, giving possible
reasons for improvement /deterioration.
Calculate the amount available for sourcing of capital expenditure in each
year and how is it normally allocated.
Ready
reckoner for calculation of Operating Ratio
|
SN |
Particulars |
formulae |
Amount |
|
SN |
Particulars |
formulae |
Amount |
Finding |
|
1. |
Coaching Earnings (less refunds) |
|
|
10 |
OWE - Ordinary Working Expenses |
|
|
|
|
|
2. |
Goods Earnings (less refunds) |
|
|
11 |
Appropriation to DRF |
|
|
|
|
|
3 |
Traffic Earnings |
(1 + 2) |
|
12 |
Appropriation to Pension Fund |
|
|
|
|
|
4 |
Sundry Other Earnings (less refunds) |
|
|
|
|
|
|
|
|
|
5 |
Gross Earnings |
(3 + 4) |
|
13 |
Gross Working Expenses |
(10 + 11 + 12) |
|
O.R = 13/5 x 100 |
|
|
6 |
Suspense |
|
|
14 |
Suspense |
|
|
|
|
|
7 |
Gross Receipts |
(5 + 6) |
|
15 |
Gross Expenditure |
(13 + 14) |
|
|
|
|
8 |
Miscellaneous Receipts |
|
|
16 |
Miscellaneous Expenditure |
|
|
|
|
|
9 |
Total Revenue Receipts |
(7 + 8) |
|
17 |
Total Revenue Expenditure |
(15 + 16) |
|
Net Revenue = 9 - 17 |
Surplus = Net Revenue minus Dividends paid. (Shortfall if the figure is negative)
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