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Performance Oriented but no populist measure is the way forward for Indian Railways : Mr Arun Jaitley
Dec 20, 2016

“Rather than populist measures, performance-oriented practice is the way-forward for Indian Railways” said Mr Arun Jaitley, Minister of Finance and Corporate Affairs in the National Conference on ‘Accounting Reforms in Indian Railways - A Strategic Mission for Sustainable Growth’, organized by Ministry of Railways in partnership with Confederation of Indian Industry at Vigyan Bhawan, New Delhi, today. Mr Jaitley focused on the challenges posed to Indian Railways on account of rising competition, though not within the Railway sector, but from other modes of transportation especially roadways and airlines. He emphasised that in order to face its competitors, Indian Railways should focus on professionalism rather than populism and on its core competencies and not the businesses which do not form the primary activity of providing transportation services. He also highlighted that world over, the financial model followed by the transport sector is based on customers paying for the services they receive. However, Indian Railways by not following this model is getting caught in its own trap.

During the inaugural session, Mr Arun Jaitley released the publications on ‘Accrual based Financial Statements of North Western Railway’; ‘Significant Accounting Policies’ and ‘Accrual Accounting Implementation Manual’, which are the outcome of the pilot study undertaken by Indian Railways at North Western Railways. He also congratulated Indian Railways for undertaking the Accounting Reforms project and advised that the accounting system must reveal rather than conceal the true financial health.

Mr Suresh Prabhakar Prabhu, Hon’ble Minister of Railways, in his key note address stated that, “the accounting system is like a health card of an organization which reflects its financial health”. He further added that, accounting reforms is a massive project and is not just confined to accounting conversion from single entry to double entry and conversion from cash to accrual accounting instead it is an integrated project covering performance costing and outcome budgeting. He opined that the system should aim at linking the outlays to outputs and outcomes and should lead to ‘accounting for accountability’ which should go hand-in-hand. He highlighted that we cannot have an appropriate pricing mechanism if we cannot determine our cost of services. “Indian Railways should adopt a cost centre and profit centre approach to ensure correct allocation and utilisation of resources and assess the performance of each of them on an individual basis”, said Mr Prabhu.

Speaking earlier in the session, Mr. Shahzad Shah, Financial Commissioner, Ministry of Railways highlighted on the changing needs of the finance manager in an ever-changing complex business environment and focused on adapting to changing environment, building capabilities to use innovative technologies and data analytics and broadening the skill set of the team.

Mr. Naresh Salecha, Adviser (AR) & Mission Director speaking in the Inaugural session mentioned that the need for Accounting Reforms in Indian Railways arises primarily for three key reasons namely availability of comprehensive and meaningful financial information, having a responsive and reliable costing framework and to meet the funding requirements of Indian Railways. He stated that the Vision of the Accounting Reforms in Indian Railways is cornered around meeting the stakeholders’ expectations through right accounting, right costing and right outcome. He also shared the plans to replicate the pilot study undertaken at North Western Railway to all its Zonal Railways and Production units and indicated the Indian Railways’ plans to develop an integrated framework for performance costing and outcome budgeting.

20 December 2016

New Delhi

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