ECR and Operating ratio 1

What is ECR? It shows how much expenditure is covered by the revenue earned by that unit Value can be less than 100 or more than 100 If <100: revenue is less than expenditure. (Loss) If >100: revenue is more than expenditure (Profit) 2

Why needed?  Is a measure of profitability or loss  If each unit earns as much as it spends, deficit can be wiped out  Puts focus on unit level profitability  Helps sensitize staff towards earning potential of each office. 3

To achieve the ideal operating ratio/ Expense Coverage Ratio:- ◦By controlling/minimizing the revenue expenditure, ◦By achieving revenue targets and preventing the Revenue pilferages, ◦By maximizing the revenue collections/ recoveries from other organizations for the services rendered to them, ◦By properly implementing the opportunities of new schemes/services introduced from time to time. 4

How to calculate ECR? Sale of postage stamps/stationery100% Postage in cash, unpaid article amount, franking machine amount 100% Money order commission100% IPO commission100% Telephone billTotal no of bills collected x Rs.5/- GEBTotal no of bills collected x Rs. 5/- SB accountRs per live account yearly SB accountRs per silent account yearly KVP/NSC certificateTotal No of certificate(issue/Discharge) x59.95 IVP certificateTotal No of certificate (Discharge) x PLI7% of premium collected RPLI10% of premium collected Railway/telecom pensionersRs. 80/- per payment EPF pensionersRs per payment Total income of the Post office: 5

How to calculate ECR? IMTSRs. 260 per transaction Post box/post bag rent100 % Post office quarter rent100% Advertisement income100% Exam fee income100% MO/VPMO from /sale of AD income 100% Issue of identity card100% Sale of old records100% Speed post revenue100% Sale of gold coin4% of Total amount Sold Judicial/non judicial stamp3% of Total purchase (for HO only) Sheetal alovera sale30% of Total sale Any other income which are not included above 100% Total income of the Post office: Cont…. 6

◦(a) Establishment charges of the office. ◦ The average cost of the establishments. ◦The pension and leave salary element equal to 12% and 11% respectively, on the average cost of the time scale of pensionable posts should be added. ◦ All allowances such as DA, HRA and CCA admissible on the average cost should be taken in to account while calculating the establishment charges. 7 Cost :

(b) A fixed addition to the establishment charges. (Rs for the Sub Office) © Fixed house rent in the case of rented building or assessed rent of the office if it is in the departmental building. (d ) Fixed stationery charges for the office. 8 Cost

(e) 2/3 rd of the Line Establishment charges that are maintained solely for the benefit of the office. (f) 5% of the total value of postage stamps sold at the office to cover the cost of printing stamps, Post cards etc., and the cost of Direction and Audit. 9

Expense Coverage Ratio ECRNet Revenue receipt x 100 ECR = Net Revenue receipt x 100 Net Working Expenses Where : Net Revenue receipts = Gross Revenue receipts (-) Refunds; and Net working expenditure = Gross working expenditure less depreciation and recoveries. ECR Figure of more than 100(ECR )means a profitable state of business 10

Operating Ratio Operating RatioNet Expenditure Operating Ratio = Net Expenditure Net Revenue Where : Net Revenue receipts = Gross Revenue receipts (-) Refunds; and Net working expenditure = Gross working expenditure less depreciation and recoveries. Operating Ratio Operating Ratio of less than 1 indicates profitable state of business. 11

Exercise Calculate the ECR for an office under your sub division with the help of information brought by you. 12

Thank You 13