E&Y may rejig rail accounts

Ernst & Young is expected to be appointed as the adviser for Indian Railways' accounting reforms programme. With the Asian Development Bank (ADB) clearing the proposal for appointment of consultants, the reform process is expected to begin by December.

There were two firms, including PriceWaterhouse Coopers, in the race to the post and the proposal was sent to ADB in order to ensure all international norms were met with, railway ministry officials said. They added that the consultant would be given a time frame of two years to submit its report.

Officials added that the scope of work included reconciling its accounting with internationally accepted railway accounting standards and practice, along with adhering to the existing government reporting requirement. Officials said one of the main aims of the reforms would be to strengthen the costing system of railways.

"Even at present, our revenues are accounted for adequately but it is the accounting for costs that is the weak spot for the Railways," an official said. Separate accounts will be made for the freight segment and the passenger segment which will be included under the 'Lines of Business' or the earning centres.

Under 'Lines of Services' or the cost centres, infrastructure departments like tracks and coaching will be included.

To make the costing more transparent, the railways are mulling a system of surcharge that an inefficient department will have to pay an efficient one.

The concept of penalties has been mooted to create incomes for the Line of Services, which only involves expenditure on constructing and maintaining infrastructure.

"The aim is to create a complete accounting system, where it is easy to keep track of inefficiencies of each department in terms of additional cost it is imposing on other departments," he said.

If the line of services departments cannot match their income and expenditure through inter-departmental transfer of funds via the proposed system of penalties, the government could pitch in through providing subsidies.

"This would help the government to channel its subsidy in a desired direction. The government is more willing to fund the infrastructure activities of the railways," he said.