The Andhra Pradesh Fiscal Responsibility and Budget Managment Act, 2005

Short title and commencement -

1. (1) This Act may be called the Andhra Pradesh Fiscal Responsibility and Budget Management Act, 2005.
2. (2) It shall be deemed to have come into force with effect on and from the 3rd June, 2005.

Definitions - In this Act, unless the context otherwise requires,-

1. (a) "budget" means the annual financial statement laid before the House or Houses of the State Legislature under Article 202 of the Constitution;
2. (b) "current year" means the financial year preceding the ensuing year;
3. (c) "ensuing year" means the financial year for which the budget is being presented;
4. (d) "financial year" means the year beginning on the 1st April and ending on 31st March next following;
5. (e) "GSDP" means Gross State Domestic Product at current market prices;
6. (f) "fiscal deficit" is the excess of aggregate disbursements (net of debt repayments) over revenue receipts, recovery of loans and non-debt capital receipts;
7. (g) "fiscal indicators" are such indicators as may be prescribed for evaluation of the fiscal position of the State Government;
8. (h) "fiscal targets" are the numerical ceilings and proportions to total revenue receipts
9. (TRR) or GSDP for the fiscal indicators;
   • (i) "prescribed" means prescribed by the rules made under this Act;
10. (j) "previous year" means the year preceding the current year;
11. (k) "revenue deficit" means the difference between revenue expenditure and total revenue receipts (TRR); Explanation- ‘Total revenue receipts'
12. (TRR) includes State's own revenue receipts (both tax and non-tax) and current transfers from the Centre (comprising grants and State's share of Central taxes).
13. (ka) “stage-1 sanctions’ means, the administrative approval accorded for the following items which will help in preparation of detailed project reports,-
    • (i) Detailed investigation;
    • (ii) Preparation of EIA and EMP reports, R&R plan, forest clearance etc.,
    • (iii) Preparation of detailed designs/drawings;
    • (iv) Obtaining of necessary clearances;
    • (v) Acquisition of minimum lands required;
    • (vi) Completion of R&R and EMP etc.,;
    • (vii) Shifting of utilities for R&B Works;]
14. (l) "total liabilities" means the liabilities under the Consolidated Fund of the State and the Public Account of the State and shall also include borrowings by the public sector undertakings and the special purpose vehicles and other equivalent instruments including guarantees where the principal and/ or interest are to be serviced out of the State budgets.

Fiscal Management Objectives - The State Government shall, -

1. (a) take appropriate measures to eliminate the revenue deficit and thereafter build up adequate revenue surplus and contain the fiscal deficit at a sustainable level, and utilize such surplus for discharging the liabilities in excess of the assets or for funding capital expenditure;
2. (b) pursue policies to raise non-tax revenue with due regard to cost recovery and equity; and
3. (c) lay down norms for prioritisation of capital expenditure, and pursue expenditure policies that would provide impetus for economic growth, poverty reduction and improvement in human welfare.

Fiscal Management Principles - The State Government shall be guided by the following fiscal management principles, namely;-

1. (a) transparency in setting the fiscal policy objective, the implementation of public policy and the publication of fiscal information so as to enable the public to scrutinise the conduct of fiscal policy and the state of public finances;
2. (b) stability and predictability in fiscal policy making process and in the way fiscal policy impacts the economy;
3. (c) responsibility in the management of police finances, including integrity in budget formulation;
4. (d) fairness to ensure that policy decisions of the State Government have due regard to their financial implications on future generations; and
5. (e) efficiency in the design and implementation of the fiscal policy and in managing the assets and liabilities of the public sector balance sheet.

Fiscal Policy Statements to be laid before the Legislature - The State Government shall in each financial year lay before the House/Houses of the Legislature, the following statements of fiscal policy along with the budget, namely:-

1. (a) the Macroeconomic Framework Statement;
2. (b) the Medium Term Fiscal Policy Statement; and
3. (c) the Fiscal Policy Strategy Statement. 1[(d) the statement on the number of employees in Government, Public Sector Undertakings and aided institutions and expenditure of State Government towards salaries and pensions.]

Macro-economic Framework Statement - The Macroeconomic Framework

Medium Term Fiscal Policy Statement Medium Term Fiscal Policy Statement -

1. (1) The Medium Term Fiscal Policy Statement shall set forth in such form as may be prescribed the fiscal management objectives of the State Government and three-year rolling targets for the prescribed fiscal indicators with clear enunciation of the underlying assumptions.
2. (2) In particular and without prejudice to the provisions contained in sub-section (1), the Medium Term Fiscal Policy Statement shall include the various assumptions behind the fiscal indicators and an assessment of sustainability relating to,-
   • (i) the balance between revenue receipts and revenue expenditure;
   • (ii) the use of capital receipts including borrowings for generating productive assets;
   • (iii) the estimated yearly pension liabilities worked out on actuarial basis for the next ten years. Provided that in case it is not possible to calculate the pension liabilities on actuarial basis during the period of first three years after the coming into force of this Act, the State Government may, during that period, estimate the pension liabilities by making forecasts on the basis of trend growth rates.

Fiscal Policy Strategy Statement - The Fiscal Policy Strategy Statement shall be in such form as may be prescribed and shall contain, inter alia,-

1. (i) the fiscal policies of the State Government for the ensuing year relating to taxation, expenditure, borrowings and other liabilities (including borrowings by Public Sector Undertakings and Special Purpose Vehicle and other equivalent instruments where liability for repayment is on the State Government), lending, investments, other contingent liabilities, user charges on public goods/utilities and description of other activities, such as guarantees and activities of Public Sector Undertakings which have potential budgetary implications;
2. (ii) the strategic priorities of the State Government in the fiscal area for the ensuing year;
3. (iii) the key fiscal measures and the rationale for any major deviation in fiscal measures pertaining to taxation, subsidy, expenditure, borrowings and user charges on public goods/utilities; and
4. (iv) an evaluation of the current policies of the State Governmentvis-a-vis the fiscal management principles set out in section 4, the fiscal objectives set out in the Medium-Term Fiscal Policy Statement in sub-section

1. (1) of section 7 and fiscal targets set out in section 9.

Fiscal Targets -

1. (1) The State Government may prescribe such targets as may be deemed necessary for giving effect to the fiscal management objectives.
2. (2) In particular, and without prejudice to the generality of the foregoing provisions, the State Government shall,-
   • (a) reduce revenue deficit by an amount equivalent to at least 0.32 percentage point of GSDP in each financial year, beginning from

the 1st day of April 2005, so as to eliminate it by 31st March 2009

and generate revenue surplus thereafter; Provided that for the financial years from 2015-16 to 2019- 20, the Revenue Deficit shall not be more than 2.5 % of GSDP including onetime additional borrowing of Rs. 2,534 crore permitted by Government of India for the year 2019-20. Provided further that for the financial year ending March 2021, the Revenue Deficit shall be contained within 4.5% of GSDP and reduced progressively thereafter.”.

1. (b) reduce fiscal deficit by an amount equivalent to atleast 0.25 percentage point of Gross State Domestic Product in each financial year beginning from the 1st day of April, 2005, so as to bring it down to not more than 3 percent; subject to the fiscal deficit limits fixed by the Government of India from time to time. Provided that for the financial year ending March, 2009 the fiscal deficit shall not be more than 3.5 percent of G.S.D.P and for the financial year ending March, 2010 the fiscal deficit shall not be more than 4 percent of G.S.D.P. Provided further that for the financial years from 2015-16 to 2020-21, the Fiscal Deficit shall not be more than 5 % of GSDP, including onetime additional borrowing of Rs. 2,534 crore permitted by Government of India for the year 2019-20 and including 2% of GSDP additional borrowing permitted by Government of India for FY 2020-21 in the wake of Covid-19 pandemic, and sought to be progressively reduced thereafter.
2. (c) ensure within a period of five years, beginning from the initial

financial year on the 1st day of April 2005, and ending on the 31st

day of March 2010, that the outstanding total liabilities do not exceed 35 per cent of the estimated GSDP for that year;

1. (cc) ensure within the subsequent period of five years, beginning from the financial year on the 1st day of April, 2010, and ending on the 31st day of March, 2015, that the total outstanding liabilities do not exceed 27.6 percent of the GSDP, as prescribed by the Government of India in pursuance of the recommendations of Thirteenth Finance Commission, year wise as follows:

1. (ccc) ensure that for the financial years from 2015-16 to 2020-21, the outstanding total liabilities do not exceed 35 per cent of the estimated GSDP and maintain thereafter, including onetime additional borrowing of Rs. 2,534 crore permitted by Government of India for the year 2019-20 and 2% of GSDP additional borrowing permitted by Government of India for FY 2020-21 in the wake of Covid-19 pandemic.”.
2. (d) limit the amount of annual incremental risk weighted guarantees to 90 per cent of the TRR in the year preceding the current year: Provided that revenue deficit and fiscal deficit may exceed the limits specified under this section due to ground or grounds of unforeseen demands on the finances of the State Government arising out of internal disturbance or natural calamity or such other exceptional grounds as the State Government may specify: Provided further that a statement in respect of the ground or grounds specified in the first proviso shall be placed before the

Measures for Fiscal Transparency Measures for Fiscal Transparency -

1. (1) The State Government shall take suitable measures to ensure greater transparency in its fiscal operations in the pubic interest and minimise as far as practicable, secrecy in the preparation of the budget.
2. (2) In particular, and without prejudice to the generality of the foregoing provisions, the State Government shall, at the time of presentation of the budget, make disclosures on the following, along with detailed information in such forms as may be prescribed,-
   • (a) the significant changes in the accounting standards, policies and practices affecting or likely to affect the computation of fiscal indicators;
   • (b) details of borrowings by way of Ways and Means Advances/ Overdraft availed of from the Reserve Bank of India.
3. (3) Whenever the State Government undertakes to unconditionally and substantially repay the principal amount and/ or pay the interest of any separate legal entity, it has to reflect such liability as the borrowings of the

Measures to enforce compliance Measures to enforce compliance -

1. (1) The Minister-in-Charge of the Department of Finance (hereinafter referred to as Minister of Finance) shall review, every quarter, the trends in receipts and expenditure in relation to the budget estimates and place before the House or Houses of the Legislature, the outcome of such reviews.
2. (2) Whenever there is either shortfall in revenue or excess of expenditure over the intra-year targets mentioned in the Fiscal Policy Strategy Statement or the rules made under this Act, the State Government shall take appropriate measures for increasing revenue and/or for reducing the expenditure, including curtailment of the sums authorised to be paid and applied from out of the Consolidated Fund of the State. Provided that nothing in this sub-section shall apply to the expenditure charged on the Consolidated Fund of the State under clause
3. (3) of article 202 of the Constitution or any other expenditure, which is required to be incurred under any agreement or contract, which cannot be postponed or curtailed. (3)
   • (a) Except as provided under this Act, no deviation in meeting the obligations cast on the State Government under this Act shall be permissible without approval of Legislature:
   • (b) Where owing to unforeseen circumstances, any deviations is made in meeting the obligations cast on the State Government under this Act, the Minister of Finance shall make a statement in the House or Houses of Legislature explaining, -
     • (i) any deviation in meeting the obligations cast on the State Government under this Act;
     • (ii) whether such deviation is substantial and relates to the actual or the potential budgetary outcomes; and
     • (iii) the remedial measures the State Government proposes to take.
4. (4) Any measure proposed in the course of the financial year, which may lead to an increase in revenue deficit, either through increased expenditure or loss of revenue, shall be accompanied by a statement of remedial measures, proposed to neutralise such increase or loss and such statement shall be placed before the House/Houses of Legislature.
5. (5) The State Government may set up an agency independent of the State Government to review periodically the compliance of the provisions of this Act and table such reviews in the House or Houses of the State Legislature. (6-A) The total value of capital works sanctioned, other than Stage-1 sanctions, by any Department in a financial year under the appropriate Head of Account shall be such that,-
   • (i) the cumulative value of sanctioned works including spill over commitments shall not exceed three times of budget estimate for the corresponding Head of Account for that year; and
   • (ii) the total value of works scheduled to be executed as per contractual requirements; in that year including spill over commitments shall not exceed one and a half times the budget estimate for the corresponding Head of Account for that year. (6-B) The Minister of Finance shall review, every quarter, and shall,-
   • (i) places the matter before the Council of Ministers to evolve a mechanism to bring the sanctions within limits, where the works sanctioned are not in accordance with the provisions under sub-section (6-A) for any quarter;
   • (ii) place the matter before the Legislature, where the works sanctioned are not in accordance with the provisions under sub-section (6-A) for two successive quarters; and
   • (iii) ensure that the works sanctioned are brought in accordance with sub-section (6-A) within two financial years, where the works sanctioned are not in accordance with the said provisions as on the date of commencement of the said provisions under sub-section (6-A). (6-C) If for any special reasons, as may be prescribed, works are sanctioned exceeding the limits in a financial year, the Minister of Finance shall during the year place before the Legislature the reasons therefor and the schedule for restoring it to the prescribed limits.

Protection of action taken in good faith - No suit, prosecution or other legal proceedings shall lie against the Government or any officer, authority or person empowered to exercise the powers and perform the functions by or under this Act for anything which is in good faith done or intended to be done under this Act or the rules or orders made thereunder.

Application of other laws not barred - Save as otherwise provided the provisions of this Act shall be in addition to and not in derogation of any other law for the time being in force, except to the extent the provisions of other laws are inconsistent with ahy provisions of this Act.

Power to remove difficulties - If any doubt or difficulty arises in giving effect to the provisions of this Act, the Government may, by order make such provisions or give such directions not inconsistent with the provisions of this Act as may appear to it to be necessary or expedient for removal of doubt or difficulty:

Power to Make Rules Power to Make Rules -

1. (1) The State Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.
2. (2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely, -
   • (a) the form of the Macroeconomic Framework Statement under section 6;
   • (b) the form of Medium-Term Fiscal Policy Statement, including the targets for the fiscal indicators, under section 7;
   • (c) the form of Fiscal policy Strategy Statement under section 8;
   • (d) the forms for disclosure under sub-section
3. (2) of section 10;
   • (e) measures of enforce compliance;
   • (f) the manner of review of compliance of the provisions of this Act by the independent agency under section 11; and
   • (g) any other matter which is required to be, or may be, prescribed.
4. (3) Every rule made under this Act shall be laid, as soon as may be after it is made, before the House or Houses of the Legislature, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, the House/Houses agree in making any modification in the rule or the House/ Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Repeal of Ordinance No. 9 of 2005 - The Andhra Pradesh Fiscal Responsibility and Budget Management Ordinance, 2005 is hereby repealed.