The State and Fiscal Responsibility Budget Management Act 2005

(1) This Act may be called the Madhya Pradesh Fiscal Responsibility and Budget Management Act, 2005. (2) It extends to the whole of the State of Madhya Pradesh. (3) It shall come into force on such date as the State Government may, by notification in the Official Gazette, appoint.

In this Act, unless the context otherwise requires:- (a) "Budget" means the annual financial statement laid before the State Legislature under Article 202 of the Constitution; (b) "Current Year" means the financial year preceding the ensuing year; (c) "Ensuing Year" means the financial year for which the budget is being presented; (d) "Financial Year" means the year beginning on the first day of April; (e) "Fiscal Deficit" means the excess of total disbursements (net of repayment of debt) over total revenue receipts, recovery of loans and non-debt capital receipts; (f) "Fiscal Targets" means the numerical ceiling and ratio of such measures as may be prescribed for evaluation of the fiscal position of the State Government; (g) "GSDP" means the Gross State Domestic Product at current market prices; (h) "Reserve Bank" means the Reserve Bank of India constituted under sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); (i) "Revenue Deficit" means the difference between revenue expenditure and revenue receipts of the State Government; (j) "Total Liabilities" means the liabilities under the Consolidated Fund of the State and the Public Account of the State and includes the risk-weighted guarantee obligations of the State Government, where the principal and/or interest are met out of the State budget.

The State Government - (a) shall take appropriate measures to eliminate revenue deficit and thereafter maintain sufficient revenue surplus and maintain fiscal deficit at a sustainable level and utilize such surplus for funding capital expenditure; (b) shall pursue policies to increase non-tax revenue with due regard to cost recovery and equity; and (c) shall lay down fiscal policy for priority of capital expenditure and follow such expenditure policies that would be a catalyst for economic growth, poverty reduction and promotion of human welfare.

The State Government shall be guided by the following principles of fiscal management, namely:- (a) transparency in implementation of public policy in setting fiscal policy objectives and in disclosing fiscal information that would enable the public to oversee the operation of fiscal policy and public finance; (b) stability and predictability in fiscal policy making; (c) accountability in public finance management, including integrity in budget making; (d) ensuring such fairness that policy decisions of the State Government take into account the financial impact on future generations; and (e) efficiency in formulation and implementation of fiscal policy.

The State Government shall lay before the State Legislature, along with the budget, the following fiscal policy statements, namely:- (a) Macroeconomic Framework Statement; (b) Medium Term Fiscal Policy Statement; and (c) Fiscal Policy Strategy Statement.

The Macroeconomic Framework Statement shall be in such form as may be prescribed and shall contain an overview of the State economy, analysis of growth and sectoral composition of GSDP and an assessment of related State Government financial and future prospects.

(1) The Medium Term Fiscal Policy Statement shall be in such form as may be prescribed and shall contain Five Year rolling targets for fiscal objectives and projections of the State Government. (2) In particular and without prejudice to the generality of the provisions contained in sub-section (1), the Medium Term Fiscal Policy Statement shall include the following in relation to assessment of fiscal targets and sustainability, -(one) balance between revenue receipts and revenue expenditures; (two) use of capital receipts including borrowings for generation of productive assets; and (three) estimated annual pension liability calculated on actuarial basis or using the trend of growth for the next ten years.

The Fiscal Policy Strategy Statement shall be in such form as may be prescribed and shall contain, inter alia, the following:- (one) The fiscal policies of the State Government for the ensuing year relating to taxation, expenditure, borrowings and other liabilities including guarantees; (two) The strategic priorities of the State Government for the ensuing year in the fiscal area; (three) Justification and rationale for any major deviation in fiscal measures relating to taxation, subsidy, expenditure, administered pricing and borrowings; and (four) An evaluation of the current policies of the State Government taking into account the fiscal management principles specified in section 4, fiscal objectives specified in the Medium Term Fiscal Policy Statement specified in section 7 and fiscal targets specified in section 9.

(1) The State Government may prescribe such targets as it may consider necessary for making the fiscal management objectives effective. (2) In particular and without prejudice to the generality of the foregoing provisions, the State Government - (a) shall reduce revenue deficit in every financial year so as to eliminate it by 31st March, 2009 and thereafter increase revenue surplus; (b) shall reduce fiscal deficit in every financial year so that it remains not more than 3.00 percent of GSDP by 31st March, 2009; (c) shall ensure that within a period of 10 years i.e. 31st March, 2015, the total liabilities do not exceed 40 percent of the estimated GSDP for that year; (d) shall restrict the annual growth rate of guarantees so as to ensure that the total guarantees of the current year do not exceed 80 percent of the total revenue receipts of the preceding year: Provided that the revenue deficit and fiscal deficit may exceed the limit specified under this section based on the ground or grounds of shortfall in the central tax devolution in relation to the Union budget estimates and/or based on the ground or grounds of unforeseen liabilities 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 relation to the ground or grounds specified in the first proviso shall be laid before the State Legislature as contained in section 11.

(1) The State Government shall take suitable measures to ensure greater transparency in its fiscal operations in public interest. (2) In particular and without prejudice to the generality of the foregoing provisions, the State Government shall make disclosures along with the budget, in such forms as may be prescribed, with detailed information, as follows:- (a) significant changes in the accounting standards, policies and practices affecting or likely to affect the fiscal calculation; (b) details of borrowers and receipts in the form of loans and advances and overdrafts from the Reserve Bank of India; (c) details of the number of employees in the State Government, State public sector undertakings and State aided institutions and related salaries.

(1) The Minister in-charge of Finance (hereinafter referred to as Finance Minister) shall review every half year the trends in receipts and expenditures in relation to the budget estimates and place the result of such review before the State Legislature. (2) Whenever there is either a shortfall in revenue or excess in expenditure in the half-yearly targets as described in the Fiscal Policy Strategy Statement or rules made under this Act, the State Government shall take appropriate measures to increase the revenue and/or reduce the expenditure including reduction of authorized amounts to be paid and utilized out of the Consolidated Fund of the State: Provided that nothing in this sub-section shall apply to expenditure charged on the Consolidated Fund of the State under clause (3) of Article 202 of the Constitution, or any such expenditure as is required to be incurred under any agreement or contract or any other expenditure which cannot be deferred or reduced. (3) (a) Except as provided in this Act, no deviation in meeting the obligations of the State Government under this Act shall be permissible without the approval of the State Legislature. (b) Where owing to unforeseen circumstances, any deviation is made in meeting the obligations of the State Government under this Act, the Finance Minister shall make a statement in the State Legislature explaining the following:- (one) any deviation in meeting the obligations of the State Government under this Act; (two) whether such deviation is substantial and relates to actual or potential budgetary outcomes; and (three) the remedial measures which the State Government proposes to take. (4) The State Government may entrust to an agency independent of the State Government, the responsibility of periodically reviewing the compliance to the provisions of this Act and such review shall be placed on the table of the State Legislature.

(1) The State Government may, by notification in the Official Gazette, make rules to carry out the provisions of this Act. (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 the Medium Term Fiscal Policy Statement including fiscal targets under section 7; (c) the form of the Fiscal Policy Strategy Statement under section 8; (d) the form for disclosure under sub-section (2) of section 10; (e) the measures to enforce compliance under section 11; (f) the manner of review of compliance to the provisions of this Act by an independent agency under section 11; and (g) any other matter which is required to be or may be prescribed. (3) All rules made under this Act shall be laid, as soon as may be after they are made, on the table of the Legislative Assembly.

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

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 as may appear to be necessary for removing the difficulty, not being inconsistent with the provisions of this Act: Provided that no such order shall be made under this section after the expiry of two years from the commencement of this Act. (2) Every order made under this section shall be laid, as soon as may be after it is made, before the Legislative Assembly.