Subsidise rail losses, PMO tells Finance Ministry

The directive ends a tussle that commenced after the merger of the Railway and Union Budgets, as the Finance Ministry discontinued the exercise of imparting annual subsidy to the railways. The Prime Minister’s Office (PMO) has directed the Ministry of Finance to fund the losses incurred by the railways in running non-worthwhile trains on strategic lines and backward regions. The directive ended a brawl that started after the merger of the Railway and Union Budgets because the Finance Ministry discontinued the exercise of offering the annual subsidy to the railways.

At an assembly held closing month, the PMO directed the Finance.

Ministry to reimburse the losses incurred on strategic rail lines discontinued following the merger of the Budgets, said a senior Ministry of Railways authentic, who didn’t desire to be recognized. The assembly was chaired by Nripendra Misra, Principal Secretary to the Prime Minister, to clear up the difficulty. Railway Board Chairman A.K. Mital, Railway Board Financial Commissioner B.N. Mohapatra, Department of Financial Services Secretary Anjuli Chib Duggal, and the Ministry of Finance’s joint secretary (Budget) have been consistent with resources.

The selection is a comfort to the railways, which feels that the Central authorities must fund the social service responsibility borne via it to walk non-worthwhile lines of countrywide and strategic importance. The losses on running the strategic lines account for a small fraction of the expected over ₹34,000 crores borne by the railways towards social carrier duty.


Running losses: which Indian trains pay their manner?

The Ministry of Finance reimburses the railways’ operational losses incurred on six strategic lines and the strains in hilly, coastal, and backward regions every year. However, after the budget merger, the Finance Ministry argued that since the ‘capital-at-charge’ of the railways, which represents the full investment made with the aid of the Union government inside the railways, could be wiped off, the subsidy payment within the shape of reimbursement of losses on the strategic strains and other concessions can be discontinued.

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“However, the PMO discovered this argument unviably,” the respectable said. The Standing Committee on Railways, headed by Trinamool Congress MP Sudip Bandyopadhyay, and the Estimates Committee, led by BJP veteran Murli Manohar Joshi, have additionally recommended that the railways need to get back the money invested in loss-making traces of national importance. Nobody knows your business rail better than you do. After all, you are the CEO of the Finance  Ministry.

You know what the engineers do and what the product managers do, and nobody understands the sales process better than you. You know who is carrying their weight and who isn’t. That is unless we’re talking about the finance and accounting managers.

Most CEOs come from operational or sales backgrounds, especially in small and mid-size enterprises. They have often gained some knowledge of finance and accounting through their careers, but only to the extent necessary. But as the CEO, they must judge the performance and competence of the accountants and the operations and sales managers.

Finance Ministry

So, how does the diligent CEO evaluate his company’s finance and accounting functions? All too often, the CEO assigns a qualitative value based on the quantitative message. In other words, if the Controller delivers a positive, upbeat financial report, the CEO will have positive feelings toward the Controller. And if the Controller provides a bleak message, the CEO will negatively react to the person. Unfortunately, “shooting the messenger” is not at all uncommon.

The dangers inherent in this approach should be obvious. The Controller (or CFO, bookkeeper, whoever) may realize that to protect their career, they need to make the numbers look better than they are. They must draw attention away from negative matters and focus on positive values. This raises the probability that important issues won’t get the attention they deserve. It also increases the possibility that good people will be lost for the wrong reasons.

The CEOs of large public companies have a big advantage in evaluating the finance department’s performance. They have the audit committee of the board of directors, the auditors, the SEC, Wall Street analysts, and public shareholders giving them feedback. However, in smaller businesses, CEOs must develop methods and processes to evaluate their financial managers’ performance.

Here are a few suggestions for the small business CEO:

Timely and Accurate Financial Reports

The chances are that you have been advised to insist on “timely and accurate” financial reports from your accounting group at some point in your career. Unfortunately, you are probably an excellent judge of what is timely, but you may not be nearly as good as what is accurate. Certainly, you don’t have the time to test the recording of transactions and verify the accuracy of reports, but there are some things that you can and should do.

  • Insist that financial reports include comparisons over several periods. This will allow you to judge the consistency of recording and reporting transactions.
  • Make sure that all anomalies are explained.
  • Recurring expenses such as rent and utilities should be reported in the appropriate period. An explanation that – “there are two rents in April because we paid May early” – is unacceptable. The May rent should be reported as a May expense.
  • Occasionally, ask to be reminded about the company’s policies for recording revenues, capitalizing costs, etc.

Beyond Monthly Financial Reports

You should expect to get information from your accounting and finance groups daily, not just when monthly financial reports are due. Some good examples are:

  • Daily cash balance reports.
  • Accounts receivable collection updates.
  • Cash flow forecasts (cash requirements)
  • Significant or unusual transactions.

Consistent Work Habits

We’ve all known people who took it easy for weeks, then pulled an all-nighter to meet a deadline. Such inconsistent work habits indicate that the individual is not attentive to processes. It also sharply raises the probability of errors in frantic last-minute activities.

Willingness to Be Controversial

As the CEO, you must make it very clear to the finance/accounting managers that you expect frank information and that they will not be victims of “shoot the messenger” thinking. Once that assurance is given, your financial managers should be an integral part of your company’s management team. They should not be reluctant to express their opinions and concerns to you or other department leaders.

We created Finance For Business Owners to help business owners, CEOs, and other non-financial managers gain a better perspective and understanding of the financial side of the business. With our affiliate, The Fidelis Consulting Group, we created a series of 10 – 15 minute presentations and short articles to help business leaders better understand financial issues and incorporate that understanding into their daily operations and strategic planning.