chapter13.capital budgeting & revenue budgeting

8/10/2019 Chapter13.Capital Budgeting & Revenue Budgeting

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E2-E3/Management/Capital budgeting & Revenue budgeting Rev date: 01-04-2011

Page: 1For Internal Circulation OnlyBSNL, India

E2-E3: MANAGEMENT

CHAPTER-13

CAPITAL BUDGETING AND REVENUE

BUDGETING

(Date of creation: 01-04-2011)


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Capital Budgeting And Revenue Budgeting

Lesson Objectives:

Scope of Revenue and Capital budgeting

Classification of items of expenditure under capital and revenue

Budget estimates and revised estimates

Control of Expenditure

Budget: Its Importance And Meaning:

Planning is essential for every enterprise and is a passport to its success.

The Budget operationalises the plan and lays down the path to be followed for the

achievements of the planned objectives.

It contains quantitative, financial as well as non-financial results to be expected in

future.

It spells the mechanism for laying down the standards, achieving and

implementing plans and also provides feed back on the attainment or otherwise of

the planned targets and standards.

Budget classified on the basis of the nature of activities can be capital or revenue.

Capital Budget relates to planning for the acquisition or constructions of

infrastructure like buildings, machinery and projects having a longer life.

Planning for activities of a recurring nature for the purposes of maintenance of the

infrastructure is covered by revenue Budget.

There are mainly two types of budget in BSNL:

1. Capital Budget

2. Revenue Budget

Detailed guidelines for the preparation of these estimates are as under:

Revenue Budget:Revised Estimate and Budget Estimates under various objects and schedules pertaining to

Revenue Receipts and Working Expenses of BSNL are required to be sent to Corporate

Office latest by 15th

September each year. The following points may be kept in mind

while preparing the statements.


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The actual expenditure up to end of august (five months) and estimated

expenditure from september to march (seven months) for every year are required to

be furnished in the prescribed formats.

the term revised estimate is used both in revenue and capital budgetting

What is Revised Estimate (RE) and Budget Estimate (BE)

Actual expenditure for 5 months of current financial year ( April to August ) and

estimated expenditure for 7 months ( September to March) of current financial year is

called Revised Estimate (E) and simultaneously Budget Estimate for the ensuing

financial year i.e. next financial year is also required to be prepared.

Guidelines for Preparation of RE and BE:

i)

The figures should be shown in the statement in Thousands of Rupees for

Working Expenses and in L akhs of Rupees for Revenue Receipts.

ii) The particulars should be furnished object-wise and the statement should be

prepared in the same manner as in the prescribed proformae.

iii) It is generally seen that estimates are over projected and finally savings are shown

at the end of the year. Hence, the Estimates should be projected on realistic basis,

to enable us to finalize cash flow efficiently.

iv) In case, any additional allotment is authorized after Budget Allotment, the same

must be shown in the relevant column of the Statements.

v)

The economy instructions for keeping the expenditure controlled issued from timeto time must be kept in view while framing the estimates.

vi) Estimates of License Fee and Spectrum Charges payable is to be exhibited

separately.

vii) The requirement of funds under pension contribution for the staff and officers and

under leave salary contribution in respect unabsorbed officers may be calculated

as per provisions in FRs as well as Corporate Office instructions on the subject

issued from time to time and included in the proposals.

viii) In the present competitive environment, cutting down cost is of paramount

importance. Therefore, there is very limited scope of additional allotment at REstage under Working Expenses.

ix) In case of OTAparticularly, no additional funds be sought.

x) As regards Honorarium, the status quo will be maintained as at Budget Allotment.

Keeping in view the economy instructions and reductions in profitability of the

Corporation, no provision may be made in RE BE for Honorarium for general

purpose. However, if any Circle/Unit requires allotment under honorarium on


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account of item of work for which rate of honorarium has been fixed such as

payment for setting of questions papers, Election duty for membership

verification (back log, if any), completion of departmental enquiries, arbitration

cases, it will be considered as and when they are demanded. If increase in

allotment in any object is sought from BSNL CO, full justification may be

furnished along with matching savings. The IFAs of the circles are requir ed to

ensure the above whi le forwardi ng the Revised Estimates.

Revenue Receipts:

In order to have proper estimate of Revenue, it is necessary that in addition to the trend of

Actuals which is usually taken into consideration, the estimates of Revenue are worked

out on the basis of number of telephone lines, WLL lines and CMTS working as well as

proposed to be given and by applying average Revenue per such line. The targets for

additional Telephone, WLL lines and CMTS for each year is provided by the BSNL

Corporate Office and the likely expansion of these services would be available with the

Circles/Units. Keeping in view the BSNL Accounting policy the Estimates in prescribed

FORMATS should be framed duly supported by a statement showing the detailed

calculation separately for urban/rural, CMTS and other schemes to show how the Revised

Estimates for the current year and the Budget Estimates for the next year have been

worked out.

Capital Budget:a) Allotment of Funds under Capital Works:

Every year, the proposals in respect of Capital outlay are to be forwarded by each circle

in Prescribed formats in respect of various components such as LAND, BUILDING,

A&P, MVL (Motor Vehicles & Launches), CABLES, LINES & WIRES, SUBSCRIBER

INSTALLIATIONS., TELEPHONE EQUIPMENTS, OFFICE EQUIPMENT &

MACHINERY, ELECTRICAL FITTINGS & ELECTRICAL APPLIANCES,

FURNITURE FITTINGS, COMPUTER AND M&A ( Mast & Aerials) to Planning

Branches of of BSNL Corporate Office viz LTP, Switching, Core Network, Cellular

Mobile, Building Works, Broad Band etc. in the month of October. Subsequently allthese branches of BSNL Corporate Office assess/recommend and project a consolidated

demand in respect of all the circles to the Capital Budget Section of BSNL Corporate

office for allotment of funds.


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(b) Compilation of Capital works Programme:

Capital works programme shall be compiled only for works costing Rs.20 crores and

above instead of Rs. 5 crores and above (previously). The details are to be submitted to

BBF division of Corporate Office by the respective Circles every year in the prescribed

format to enable Corporate Office to monitor the progress of ongoing and new projects

costing more than 20 crores.

(c) Budgetary Control:

Capital Budget section will furnish details of expenditure ( as obtained from Corporate

accounts Branch) to the concerned circles and respective Planning branches of Corporate

office, on quarterly basis for monitoring physical targets via-a-viz capital expenditure

recommended by planning branches. This pro-active measure will ensure quarterly

review or reasons for budgetary variance and a periodical and centralized Budgetary

Control.

Experience has revealed that proposal for funds often contain discrepancies. Utmost care

should be taken to formulate the proposals as accurately as possible keeping in view the

actual expenditure up to August and anticipated requirements from September to March

with special reference to the estimates of Civil Wing, ITI Ltd., and imports including

freight, insurance, customs and also escalation charges, overhead charges etc. The

DFG/CWP Numbers may be mentioned in scheme/service wise/chronological order.

Further, the components are also to be arranged in the following order only.

The proposals for RE and BE have to be finalized in consultation with the Planning Cell

of the Circle/Unit and closely scrutinized by the Internal Financial Advisor in order to

ensure realistic provision of funds. IFA has to issue a certificate in this regard.

Each year service wise physical targets are communicated to the circles by Corporate

Office, the RE demand should be commensurate with the service-wise requirement of

funds for achieving the targets.

Cash Budget:

Cash Flow statement and Cash budget are two important tools used in financial planning

and cash projections. The concept of cash budget is futuristic in approach whereas cash

flow statement is based on historical (past) data.


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In BSNL, the Circles/units will please note that the cash drawl authorizations will be

restricted not only under working expenses but also under government transactions etc.

Following are the main guidelines:

1. Budget allotments are taken as base for determining of cash drawls and will be

regulated equivalent to proportionate allotment in each period of drawl especially

under Working Expenses.

2. Taking the trend of past recoveries from pay and allowances, an amount

equivalent to 60% of gross pay and allowances is taken as net pay and allowances

for disbursement in cash at the end of the month.

3 Expenditure under Working Expenses other than salaries and wages will be

restricted to proportionate periodical allotment unless specified for unusual

demand.

4. Five Percent of telephone revenue realization based on targets communicated will

be authorized for drawals towards service tax payment.

5. Authorisation under Payment of Loans and Advances including HBA will be

restricted to budget allotment to each circle/unit.

Control over expenditure:

In DoT period, control over expenditure was with reference to budget allotment only but

in BSNL two fold control over expenditure has been prescribed at various statges viz.

Corporate Office level, circle level and SSAs level for which 10 days funds authorizationis being allowed proportionately by the Corporate Office and cash is authorized based on

the budget allotment/ Revised Allotment/Final Grant. Circles are required to sent their

cash requisition to BSNL CO on 8th

, 18th

and 28th

of each month. Proportionate

Authorisation is made by BSNL CO on 1st, 11

thand 21

stof each month. DDOs are not

authorized to incur expenditure out of the revenue collected. Revenue collected is

transferred to BSNL CO on day to day basis through local bank branch to nodal branch of

the Bank at Delhi where the amount is credited in the account of BSNL. Similarly for

operational purpose, cash is authorized by BSNL CO periodically as above. Cash is

requisitioned to BSNL CO on the following objects:

Objects:-

1. Pay

2. IDA/PLI

3. Payment to DoT Cell

4. GPF Advance/Withdrawal


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5. Leave Salary contribution

6. Pension Contribution

7. Water, Electricity and Fuel Charges

8.

Vehicle Running Expenses

9. Repair and Maintenance

10. Overtime allowance

11. Other Working Expenses

12. Service Tax

13. HBA/Loans and Advances

14. Refund of EMD/SD/Telephone Revenue

15. Interconnect Usage Charges

16. Others to be specified (IT etc.)

17.

Payment for purchase of Stores/ Raw Materials

18. Payment of Excise Duty and other levies

19. Wages

20. Suppliers/contractors bills

21. Others to be specified

Economy Measures: The following measures for fiscal prudence and economy will

also come into force with immediate effect as per BSNL Corporate Office orders:

The prescribed expenditure ceilings for holding seminars, conferences, workshops

etc. should be enforced and a 10% CUT ON THE BUDGETARY ALLOCATIONFOR SEMINARS AND CONFERENCES SHALL BE EFFECTED.

Holding of exhibitions/seminars/conferences abroad is strongly discouraged

except in the case of exhibitions for trade promotion.

There will be a complete ban on holding of meetings and conferences at five star

hotels.

No travel on government account by air will take place by first class. All domestic

travel on government account air will take place only by economy class,

irrespective of the entitlement.

Where travel is unavoidable, it will be ensured that officers of the appropriatelevel dealing with the subject are sponsored instead of those at higher levels. The

size of delegation and the duration of visit will be kept to the absolute minimum.

Proposals for participation in study tours, workshops/

conferences/seminars/presentation of papers abroad at government cost will not

be entertained except those that are fully funded by sponsoring agencies.


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Purchase of vehicles, except for operational requirements of the Defence Forces,

Central Para Military Forces and security related organizations will not be

permitted.

Expenditure Management- Economy Measures and Rationalization of Expenditure

as per Govt. Of India Orders received from BSNL Corporate Office: Cut in Non

Plan Expenditure: For the year 2009-2010, every Ministry / Department shall effect

mandatory 10% cut in non Plan expenditure under the following heads:-

a) Domestic and Foreign Travel Expenses

b) Publications

c) Professional Services

d) Advertising and publicity

e)

Office expenses

f) Police ( except for security related requirement)

g) Other administrative expenses.

h) The remaining portion of non plan expenditure is 5% mandatory cut.

i) No increase in the budgetary allocations under the heads of non plan expenditure,

particularly where cuts are now being imposed, will be allowed at RE Stage ,

except under very extra-ordinary and compelling circumstances.

Introduction of Fleet Card: As a part of expenditure control BSNL has introduced cash

less purchase of diesel / petrol through Fleet card. As per directives of CMD, Heads ofCircles are requested to implement this scheme throughout their circle w.e.f 01-10-2009.

Heads of Circles may enter into arrangement for Fleet card programme with companies

like IOC and in places where IOC dealers are not available through BPCL / HPCL etc so

as to have coverage under the scheme throughout the circle and ensure that from 01-10-

2009, purchase of fuel is effected only through the Corporate Smart Card system.

Drawing and disbursing Officers were suitably instructed that no cash purchase of fuel is

made directly or through imprest / Temporary advance. Further, any cash payments made

through imprest / Temporary advance after 01-10-2009 are to be disallowed by DDOs

and recovery made from the salary of the officer concerned.

In accordance with the Agreement executed by BSNL & IOC Ltd, M/S IOC Ltd. will

issue corporate Smart Cards,"XtraPower"- to all BSNL Units for purchase of

Diesel/Petrol from their designated 'Retail Outlets, for running DG sets and vehicles. The

circles will assess the requirement of cards in all their units and place a supply order on


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IOC Ltd for the same. The card fee will be Rs.100/- (one hundred) per card and the

validity of the cards is for three years from the dale of issue. The Scheme will be

operational immediately and will be for Six months. It may be extended further based on

the experience of field units.

The Pay & Accounts officer of each SSA/Unit will hold the Master Card and will arrange

to issue user cards to their indenting units based on bonafide requirement for purchase of

Diesel/ Petrol for vehicles/DG Sets. The daily transaction limit as well as weekly /

monthly transaction limit will be fixed and controlled by him through Web based user ID/

Password. He will also authorize his bank the weekly charging of cash up to the

permitted limit on the Master card by depositing the amount by cheque or use RTGS and

also allocate through web, the transaction limit for each of his user card holder. The user

card authentication for transaction will be controlled by a four digit PIN which will be

held confidential by the authorized card holder. He will be responsible for any

unauthorized use of the card. The Charge slip for every transaction he makes should be

obtained by him which will be the basic voucher for accounting.

M/S IOC Ltd. allows rebate or discount on fuel purchase which will be reflected in their

monthly statement of transactions. The centralized MIS information can be accessed by

the Master card holder. Help on issue and usage of these cards can be obtained by visiting

www.iocxtrapower.com.


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Chapter 13:Capital Budgeting & Revenue Budgeting

Sample self study Questions

Part-A

Fill in the blanks

1. There are mainly following two types of budget in BSNL:

(a)__________________________________(b) ________________________________

2. In REBE statement for Working Expenses, the figures should be shown in

_________________ of rupees.

3.

Capital Works Programme shall be compiled only for works costing Rs.__________________ and above.

4. Under economy measures, holding of exhibitions in abroad is strongly discouragd

except in case of exhibition for _________________________.

5. As a part of expenditure control BSNL has introduced cash less purchase of

__________________________ through Fleet Card.

6.

Fleet/Smart Card fee will be Rs. __________ per card and validity of the card isfor ____________ years from the date of issue.

7. In REBE statement Revised Estimate is for ____________ financial year and

Budget Estimate for _____________ financial year.

Part-B

State True or False.

1. Cash Flow statement is based on historical (past) dats.

2. Budget allotment are taken as base for determining cash drawal.

3.

Drawing & Disbursing Officers (DDOs) are authorised to incure expenditure out

of the revenue collected.

4. Any cash payments made through Imprest/Temporary Advance towards purchase

of fuel after 1-10-2009 are to be disallowed by DDOs.


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Page: 11For Internal Circulation OnlyBSNL India

5. Under Fleet card scheme, the Pay & Accounts Officer of each SSA will hold the

master card & will arrrange to issue user card to their intending units.

6. Planning for activities of a recurring nature is covered by Capital budget.

Part-C

1. What is Revised Estimate (RE) and Budget Estimate (BE)?

2. Mention any four measures come into force as per BSNL Corporate offer orders

for fiscal prudence and economy.

chapter13.capital budgeting & revenue budgeting

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