Fiscal Management Principles

The State Government shall take appropriate measures to eliminate the revenue deficit and to contain the fiscal deficit at sustainable level and build up adequate revenue surplus through appropriate measures such as,- (a) maintaining Government debt at prudent levels; (b) managing guarantees and other contingent liabilities prudently, with particular reference to level of risk of such liabilities; (c) taking policy decisions of the Government with due regard to their financial implications on future generations; (d) borrowings for productive purposes and creation of capital assets, and are not applied to finance current expenditure; (e) maintaining a reasonable degree of stability and predictability in the level of the tax burden; (f) maintaining the integrity and stability of the tax system by avoiding special incentives, concessions and exemptions; (g) pursuing tax policies with due regard to economic efficiency and compliance costs; (h) pursuing non-tax revenue policies with due regard to cost recovery and equity; (i) pursuing expenditure policies that would provide impetus for economic growth and poverty reduction; (j) building up a revenue surplus for use in capital formation and productive expenditure; (k) maintaining physical assets of the Government properly; (l) disclosing sufficient information to allow the public to scrutinize the conduct of fiscal policy and the state of public finances; (m) using Government resources in ways that give best value for money; and also public assets are put to best possible use; (n) minimizing fiscal risks associated with running of public sector undertakings and utilities providing public goods and services; (o) managing expenditure consistent with the level of revenue generated; (p) formulating budget in a realistic and objective manner with due regard to the general economic outlook and realistic revenue prospects and minimize deviations during the course of the year; and (q) taking appropriate measures in its cash management practices so as to avoid frequent recourse to overdraft from Reserve Bank and to gradually reduce the closing cash balance with Reserve Bank of India on a year to year basis so as to keep the closing balance within the Ways and Means limit. (1) The strategic priorities of the state government in the fiscal area shall be prescribed in Form I. (2) The Medium Term Fiscal Plan shall be prepared by the State Government in Form II. (d) borrowings for productive purposes and creation of capital assets, and are not applied to finance current expenditure; (e) maintaining a reasonable degree of stability and predictability in the level of the tax burden; (f) maintaining the integrity and stability of the tax system by avoiding special incentives, concessions and exemptions; (g) pursuing tax policies with due regard to economic efficiency and compliance costs; (h) pursuing non-tax revenue policies with due regard to cost recovery and equity; (i) pursuing expenditure policies that would provide impetus for economic growth and poverty reduction; (j) building up a revenue surplus for use in capital formation and productive expenditure; (k) maintaining physical assets of the Government properly; (l) disclosing sufficient information to allow the public to scrutinize the conduct of fiscal policy and the state of public finances; (m)using government resources in ways that give best value for money; and also public assets are put to best possible use; (n) minimizing fiscal risks associated with running of public sector undertakings and utilities providing public goods and services; (o) managing expenditure consistent with the level of revenue generated; (p) formulating budget in a realistic and objective manner with due regard to the general economic outlook and realistic revenue prospects and minimize deviations during the course of the year; and (q) taking appropriate measures in its cash management practices so as to avoid frequent recourse to overdraft from Reserve Bank and to gradually reduce the closing cash balance with Reserve Bank of India on a year to year basis so as to keep the closing balance within the Ways and Means limit. In section 8 of the principal Act,– (i) after sub-section (1), the following sub-section shall be inserted, namely:– “(1-a) The State Government shall issue appropriate guidelines from time to time, for timely spending of budgetary grants.”; (ii) after sub-section (2), the following sub-section shall be inserted, namely:- “(2-a) For the purpose of ensuring compliance of the provisions of this Act, the State Government shall entrust an agency independent of the State Government interference, who shall periodically make review of such compliance and submit a report to that effect to that Government who shall cause every such report to be laid, as soon as may be after it is received, before the State Legislature.”; and (iii) to sub-section (5) the following proviso shall be inserted, namely:– “Provided that where expenditure has been made by taking advance from the Orissa Contingency fund, special supplementary statements of expenditure shall be presented in course of the year exclusively for the purpose of recoupment of such advance.”