The Himachal Pradesh Fiscal Responsibility and Budget Management Act, 2005

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

Objects and Reasons, see the Rajpatra, Himachal Pradesh (Extra-ordinary), dated th

March, 2005, pp. 4093 and 4100.

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

consistent with fiscal stability, greater transparency in fiscal operations of the State Government and conduct of fiscal policy in a medium term fiscal framework and for matters connected therewith or incidental thereto. Amended, repealed or otherwise affected by:-

1. (i) H.P. Act No. 26 of 2005 , assented to by the Governor on the th

th

September, 2005, pp. 2949-2954, effective from 21

st June, 2005.

1. (ii) H.P. Act No. 25 of 2011 assented to by the Governor on 31 st

March, 2011, published both in Hindi and English in the

Rajpatra, Himachal Pradesh, dated 2 nd April, 2011, pp. 43-45.

1. (iii) H.P. Act No. 4 of 2021

, assented to by the Governor on the

th

April, 2021, published both in Hindi and English in the

Rajpatra, Himachal Pradesh (e-Gazette), dated 23 rd April, 2021, pp. 419-421, effective from 1 st January, 2020.

1. (iv) H.P. Act No. 15 of 2022 assented to by the Governor on the th September, 2022, published in the Rajpatra, Himachal Pradesh (e-Gazette), dated 10 th October, 2022, pp. 5529-5531.
2. (v) H.P. Act No. 1 of 2023 assented to by the Governor on the th January, 2023, published in the Rajpatra, Himachal Pradesh (e-Gazette), dated 30 th January, 2023, pp. 9583-9586. BE it enacted by the Legislative Assembly of Himachal Pradesh in the Fifty-sixth Year of the Republic of India, as follows:- CHAPTER-I PRELIMINARY

1. Short title and commencement.- (1) This Act may be called the

Himachal Pradesh Fiscal Responsibility and Budget Management Act, 2005.

1. Passed in the Himachal Pradesh Vidhan Sabha and for Statement of Objects and

Reasons, see the Rajpatra, Himachal Pradesh (Extra-ordinary), dated 9 th August, 2005, pp. 2315 and 2320.

Objects and Reasons see the Rajpatra, Himachal Pradesh, dated 29 th March, 2011, pp. 10541-10542 and 10543-10544.

Objects and Reasons see the Rajpatra, Himachal Pradesh (e-Gazette),dated the th March, 2021, pp. 9289 and 9290-9291

Objects and Reasons see the Rajpatra, Himachal Pradesh (e-Gazette), dated 18

th

August, 2022, pp. 3736 and 3737.

Objects and Reasons see the Rajpatra, Himachal Pradesh (e-Gazette), dated 6 th

January, 2023, pp. 8684 and 8686.

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

1. (2) It shall come into force on such date as the State Government may, by notification in the Official Gazette, appoint. 2. Definitions.- In this Act, unless the context otherwise requires,-
   • (a) “budget” means the Annual Financial Statement laid before the State Legislative Assembly under article 202 of the Constitution ;
   • (b) “current year” means the financial year preceding the ensuing year;
   • (c) “debt receipt” shall have the same meaning as used in the finance accounts of the State by Comptroller and Auditor General;
   • (d) “ensuing year” means the financial year for which the budget is being presented;
   • (e) “financial year” means the year commencing on the first day of April;
   • (f) “fiscal indicators” means the numerical ceilings and proportions to gross state domestic product, of such measures, as may be prescribed, for evaluation of the fiscal position of the State Government;
   • (g) “fiscal deficit” means the excess of total disbursements from the Consolidated Fund of the State, excluding repayment of debt, over total receipts into the Consolidated Fund, excluding the debt receipts, during a financial year;

Explanation.- For the purpose of calculation of fiscal deficit,

borrowings by Public Sector Undertakings and Special Purpose Vehicles and other equivalent instruments, where the liability for repayment is on the State Government are to be treated as borrowings of the State Government;

1. (h) “prescribed” means prescribed by the rules made under this Act;
   • (i) “revenue deficit” means the difference between revenue expenditure and revenue receipts;
2. (j) “State” means the State of Himachal Pradesh; and
3. (k) “State Government” means the Government of Himachal Pradesh.

1. Act came into force from 1

st May, 2005 vide Notification No. Fin. Comm. D (4)- 1/2004 dated 12 th

May, 2005, published in the Rajpatra, Himachal Pradesh

(Extra-ordinary), dated 13 th May, 2005, p. 720.

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

CHAPTER-II LAYING OF MEDIUM TERM FISCAL PLAN IN THE LEGISLATIVE ASSEMBLY, FISCAL MANAGEMENT PRINCIPLES AND TARGETS AND MEASURES TO ENFORCE COMPLIANCE. 3. Medium term fiscal plan to be laid before the Legislature.- (1)

The medium term fiscal plan shall include an assessment of sustainability

relating to,-

1. (a) the balance between revenue receipts and revenue expenditures;
2. (b) use of capital receipts including borrowings for generating productive assets;
3. (c) an evaluation of the performance of the prescribed fiscal indicators in the previous year vis-à-vis the targets set out earlier, and the likely performance in the current year as per revised estimates;
4. (d) a statement on the recent economic trends and future prospects for growth and development affecting fiscal position of the State Government; and
5. (e) the strategic priorities of the State Government in the fiscal area for the ensuing financial year.

1. (2) The medium term fiscal plan shall set forth a four year rolling target for the fiscal indicators prescribed, with specification of underlying assumptions.
2. (3) The State Government shall in each financial year lay before the State Legislative Assembly a medium term fiscal plan alongwith the annual budget.
3. (4) The medium term fiscal plan shall be in such form as may be prescribed.

4. Fiscal management principles.- (1) The State Government shall

take appropriate measures to reduce the revenue deficit and manage the debt consistent with fiscal stability.

1. (2) The State Government shall be guided by the following fiscal management principles, namely: -
   • (a) to maintain State Government debt at prudent levels;
   • (b) to manage guarantees and other contingent liabilities prudently with particular reference to the quality and level of such liabilities;
   • (c) to ensure that policy decisions of the State Government have due regard to their financial implications on future generations; THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005
   • (d) to ensure a reasonable degree of stability and predictability in the level of the tax burden;
   • (e) to maintain the integrity of the tax system by minimizing special incentives, concessions and exemptions;
   • (f) to pursue tax policies with due regard to economic efficiency and compliance costs;
   • (g) to pursue non-tax revenue policies with due regard to cost recovery and equity;
   • (h) to ensure that physical assets of the State Government are properly maintained; and
     • (i) to disclose sufficient information to allow the public to scrutinize the conduct of fiscal policy and the state of public finances.

5. Fiscal management targets.-

1[(1) In particular and without prejudice to the generality of the foregoing provisions, the State Government shall-

2[(i) eliminate revenue deficit and maintain revenue surplus thereafter;]

3[(ii) maintain fiscal deficit of 6 percent or less of Gross State Domestic Product in the Financial Year 2022-23, 3.5 percent or less of Gross State Domestic Product in the Financial Years 2023-24 and 2024-25 and at the level of 3 percent or less of Gross State Domestic Product thereafter: Provided that interest free loan for a term of fifty years under the “Scheme for Special Assistance to States for Capital Expenditure” of the Central Government for financing infrastructure projects of the State, shall be allowed over and above all limits specified for fiscal deficit debt stock: Provided further that the fiscal deficit may exceed the prescribed limit if any unutilized borrowing of previous financial year is carried forward to subsequent financial year(s);]

4[(iii) reduce outstanding debt to level of such percentage of Gross

State Domestic Product, as may be prescribed; and]

1. Sub-section (1) substituted vide H.P Act No. 26 of 2005, again Sub-sections (1)

substituted vide H.P Act No. 25 of 2011.

2. Clause (i) substituted vide H.P Act No. 1 of 2023.

3. Clause (ii) amended vide H.P. Act No. 4 of 2021, 15 of 2022 and again substituted vide H.P Act No. 1 of 2023.

4. Clause (iii) substituted vide H.P Act No. 1 of 2023.

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

1. (iv) maintain outstanding risk weighted guarantees on long term debt below forty per cent of total revenue receipt in the preceding financial year for which actuals are available as per finance accounts. 1[(2) Notwithstanding anything contained in sub-section (1), the targets under different parameters of clauses (i), (ii) and (iii) of sub-section (1), may be exceeded in case of,-

1. (a) unforeseen demands on the finances of the State Government due to reasons of national security or natural calamity declared by the Central Government or the State Government, as the case may be; or
2. (b) due to increase in developmental and other unavoidable expenditure; or
3. (c) when increased borrowing limit, if any, is allowed by the Central Government from time to time: Provided that a statement in respect of the ground or grounds specified under this sub-section shall be placed before the Legislative Assembly, as soon as may be, after such deficit amount exceeds the aforesaid targets.]

(1) The State Government shall take suitable measures to ensure greater transparency in its fiscal operations in public interest and minimize as far as practicable, secrecy in the preparation of the annual budget: Provided that the State Government shall have the power to withhold any such information, which would adversely affect the interest of the State Exchequer.

1. (2) In particular and without prejudice to the generality of the foregoing provisions, the State Government shall, at the time of presentation of the annual budget, disclose in a statement in the form, as may be prescribed,-
   • (a) the significant changes in the accounting standards, policies

and practices affecting or likely to affect the computation of

prescribed fiscal indicators; and

1. (b) as far as practical and consistent with public interest, the contingent liabilities created by way of guarantees, the actual liabilities arising out of borrowings by Public Sector Undertakings and Special Purpose Vehicles and other equivalent instruments where liability for repayment is on the State Government, all claims and commitments made by the State Government having potential budgetary implications;

1. Sub-section (2) substituted vide H.P. Act No. 25 of 2011, again substituted vide

H.P Act No. 1 of 2023.

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

1[(c) the details of number of employees in Government, Public

Measures to enforce compliance.- (1) The Minister-in-charge of the Department of Finance shall review, after every six months, the trends in receipts and expenditure in relation to the budget, and place before the Legislative Assembly the outcome of such reviews. The review report shall be in such form as may be prescribed and shall explain,-

1. (a) any deviation or likely deviation in meeting the obligations cast on the State Government under this Act;
2. (b) whether such deviation is substantial and relates to the actual

or the potential budgetary outcomes, and how much of the

deviation can be attributed to general economic environment and to policy changes by the State Government; and

1. (c) the remedial measures the State Government proposes to take.

1. (2) Whenever there is a prospect of either shortfall in revenue or excess of expenditure over pre-specified levels for a given year on account of any new policy decision of the State Government that affects either the State Government or its Public Sector Undertakings, the State Government, prior to taking such policy decision, shall take measures to fully offset the fiscal impact for the current and future financial years by curtailing the sums

authorized to be paid and applied from and out of the Consolidated Fund of

the State under any Act enacted by the Legislative Assembly to provide for the appropriation of such sums, or by taking interim measures for revenue augmentation, or by taking up a combination of both: Provided that nothing in this sub-section shall apply to the expenditure charged on the Consolidated Fund of the State under clause (3) of article 202 of the Constitution.

2[(3) The State Government may entrust the Comptroller and Auditor General of India to review, the compliance of the provisions of this Act in the manner as may be prescribed and such reviews shall be laid on the table of Legislative Assembly of the State.]

(1) The State Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act.

3[(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:-

1. (a) the measures for evaluation of the fiscal position of the State Government under clause (f) of section 2;

H.P. Act No. 1 of 2023. 3. Sub-section (2) substituted vide H.P Act No. 26 of 2005.

THE HIMACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2005

1. (b) the fiscal indicators under sub-section (2) of section 3;
2. (c) the form of medium term fiscal plan under sub-section (4) of section 3;
3. (d) the form of statements for disclosure under clauses (a), (b) and (c) of sub-section (2) of section 6; and
4. (e) the form of review report under sub-section (1) of section 7.]

Every rule made under comprised in one session or in two or more successive sessions and if, before the expiry of the session in which it is so laid or the successive sessions as aforesaid, the Legislative Assembly agrees in making any modification in the rule or Legislative Assembly agrees 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, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done or omitted to be done under that rule.

No suit, prosecution or other legal proceedings shall lie against the State Government or any of its officers for anything which is in good faith done or intended to be done under this Act or the rules made thereunder.

The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.

(1) If any difficulty arises in giving effect to the provisions of this Act, the State Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act, as may appear to be necessary for removing the difficulty.

1. (2) Every order made under sub-section (1) shall be laid, as soon as may be after it is made, before the Legislative Assembly. ____________