The Sikkim Fiscal Responsibility and Budget Management Act, 2010

(1) This Act may be called the Sikkim Fiscal Responsibility and Budget Management Act, 2010. (2) It extends to the whole of Sikkim. (3) It shall come into force on such date as the 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 Legislative Assembly under article 202 of the Constitution of India; (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 1st day of April and ending on 31 day of March next following; (e) "fiscal deficit" means the excess of, - (i) 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; or (ii) total expenditure from the Consolidated Fund of the State (including loans and advances but excluding debt repayment) over own tax and non-tax revenue receipts, devolution and other grants from the Government of India to the State, and non-debt capital receipts during a financial year which represents the borrowing requirements, net of repayment of debt of the State Government during the financial year; (f) "fiscal indicator" means the measures such as numerical ceilings and proportions to gross State domestic product as may be prescribed, for evaluation of the fiscal position of the State Government; (g) "Government" means the State Government of Sikkim; (h) "Legislative Assembly" means the Legislative Assembly of the State of Sikkim; (i) "prescribed" means prescribed by rules made under this Act; (j) "previous year" means the year preceding the current year. (k) "revenue deficit" means the difference between revenue expenditure and revenue receipts; (l) "State" means the State of Sikkim; (m) "total liabilities" means the liabilities under the Consolidated Fund of the State and the Public Account of the State.

(1) The Government shall, in each financial year, lay before the Legislative Assembly a Medium Term Fiscal Plan along with the Budget. (2) The Medium Term Fiscal Plan shall set forth a three-year rolling target for the prescribed fiscal indicators with specification of underlying assumptions relating to parameters underlying projections for receipts and expenditure and the band within which they can vary while remaining consistent with targets. (3) In particular and without prejudice to the provisions contained in sub-section (2), the Medium Term Fiscal Plan shall include 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. (4) The Medium Term Fiscal Plan shall, inter-alia, contain :- (i) the medium term fiscal objectives of the Government; (5) The Medium Term Fiscal Plan shall contain, - (i) the evaluation of the performance of the prescribed fiscal indicators of the previous year versus the targets set out in the Medium Term Fiscal Plan, and the likely performance in the current year as per revised estimates; (ii) a statement on recent economic trends and its prospective from growth and development affecting fiscal position of the Government; (iii) the strategic priorities of the Government in the fiscal matters for the ensuing financial year; (iv) the policies of the Government for the ensuing financial year relating to taxation, expenditure, borrowings and other liabilities, subsidies, lending and investments, guarantees and activities of Public Sector Undertakings which have potential budgetary implications and the key fiscal measures and targets pertaining to each of these; (v) an evaluation as to how the current policies of the Government are in conformity with the fiscal management principles set out in section 4 and the fiscal objectives set out in the Medium Term Fiscal Plan; (6) The Medium Term Fiscal Plan shall be in such form as may be prescribed.

(1) The Government shall take appropriate measures to eliminate the revenue deficit and contain fiscal deficit and outstanding debt to sustainable levels. (2) The Government shall be guided by the following fiscal management principles, namely : - (a) to maintain State Government debt at prudent and sustainable level; (b) to manage guarantees and other contingent liabilities prudently, with particular reference to quality and level of such liabilities; (c) to ensure that borrowings are used for productive purposes and accumulation of capital assets, and are not applied to finance current expenditure; (d) to ensure that policy decisions of the Government have due regard to the financial implications on the future generations; (e) to ensure a total 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 policies with due regard to cost recovery and equity; (h) to pursue expenditure policies that would provide impetus to economic growth, poverty reduction and improvement in human welfare; (i) to build up a revenue surplus for use in capital formation and productive expenditure; (j) to ensure maintenance of the physical assets of the Government; (k) to maintain transparency of disclosing sufficient information to allow public to scrutinize the state of the public finances; (l) to minimize fiscal risk associated with management of public sector undertakings and the utilities providing public goods and services; (m) to manage the discharge of liabilities in accordance with the annual budget; (n) to formulate realistic and transparent revenue proposals and minimize deviations during the course of the year.

(1) In particular and howsoever to the generality of the foregoing provisions, the Government shall, - (a) ensure revenue balance beginning from the year 2011-12; (b) reduce the fiscal deficit to 3.5 percent of the estimated Gross State Domestic Product in each of the financial year starting 2010-11 and reduce the fiscal deficit to not more than three percent of the estimated Gross State Domestic Product by 31st March 2014 and adhere to it thereafter, fiscal deficit targets thereafter shall be as follows, namely :- (i) Fiscal deficit be anchored to an annual limit of 3 percent of Gross State Domestic Product. The flexibility of 0.25 percent over and above this for any given year is permissible if debt-Gross State Domestic Product ratio is less than or equal to 25 percent in the second preceding year. (ii) An additional borrowing limit of 0.25 percent of Gross State Domestic Product in a given year is permissible if the interest payments are less than or equal to 10 percent of the revenue receipts in the second preceding year. (iii) The two options under these flexibility provisions can be availed either separately, if any of the above criteria is fulfilled, or simultaneously if both the above stated criteria are fulfilled. Thus, a maximum fiscal deficit up to 3.5 percent of Gross State Domestic Product limit is permissible in any given year. (iv) The flexibility in availing the additional limit under either of the two options or both will be available if there is no revenue deficit in the year in which borrowing limits are to be fixed and the immediate Preceding year. (v) If any sanctioned borrowing limit of 3 percent of Gross State Domestic Product in any particular year is un-utilised, then the un-utilised borrowing amount (calculated in rupees) can be availed in the following year but up to fiscal year 2019-20. (c) cap the total outstanding guarantees within the specified limit, under the Sikkim Government Guarantees Act, 2000 (21 of 2000); (d) reduce debt stock to 19.04 % of the Gross State Domestic Product (GSDP) within a period of (10) ten years commencing from the year 2010-2011 and ending on 2019-20, in the manner as mentioned below:- Maximum debt stock as per centum of Gross State Domestic Product (GSDP) 2010-11: 68.40 2011-12: 65.20 2012-13: 62.10 2013-14: 58.80 2014-15: 55.90 2015-16: 20.63 2016-17: 20.00 2017-18: 19.66 2018-19: 19.32 2019-20: 19.04 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 Government due to national security, calamity of national proportion and any other exceptional grounds as the Government may specify, subject to the condition that the excess beyond limits of fiscal responsibilities does not exceed the actual fiscal cost that can be attributed to the calamities; Provided further that the ground or grounds specified in the above proviso shall be placed before the Legislative Assembly as soon as may be after the same occur, in the course of the fiscal year in which such deficit may exceed the aforesaid limits, with an accompanying report stating the extent of excess and reasons thereof.

(1) The Government shall take suitable measures to ensure the greater transparency in its fiscal operations in the public interest, in the preparation of the Budget. Provided that the Government shall have the power to reserve any information which would adversely affect the interest of the State Exchequer. (2) In particular and without prejudice to the generality of the foregoing provisions, the Government shall, at the time of the presentation of the annual budget, disclose a statement in the form as may be prescribed:- (a) the key fiscal indicators including those mentioned in section 5; (b) the significant changes in the accounting standards, policies and practices affecting or likely to affect the computation of prescribed fiscal indicators; (c) as far as practicable and consistent with protection of public interest, the contingent liabilities created by way of guarantees.

(1) The Budget and policies announced at the time of the budget, shall be consistent with objectives and targets specified in the Medium Term Fiscal Plan for the coming and future years. (2) The Minister-in-charge of the Department of Finance shall review every quarter, the trends in receipts and expenditure in relation to the budget, remedial measures to be taken to achieve the budget targets and every half year place before the Legislative Assembly the outcome of such reviews. The review report should be in such form as may be prescribed. (3) While placing before the Legislative Assembly the outcome of such review, the Minister-in-charge of the Department of Finance shall make a statement explaining, - (a) any deviation in meeting the obligations cast on the Government under this Act; (b) whether such deviation is substantial and relates to the actual or the potential budgetary outcomes; and (c) the remedial measures the Government proposes to take. (4) Any measure proposed in the course of the financial year, which may lead to an increase in revenue deficit, either through enhanced expenditure or loss of revenue, shall be accompanied by remedial measures, which will neutralize such increase or loss and such measures shall be clearly enunciated. (5) In case the revenue deficit and fiscal deficit exceed the case of unforeseen demands on the finances of the Government, the Government shall identify the net fiscal cost arising due to natural calamity and such cost would provide ceiling for extent of non-compliance to the specified limits. (6) Whenever supplementary estimates are presented to the Legislative Assembly, the Government shall also present an accompanying statement indicating the corresponding curtailment of expenditure and/or augmentation of revenue to offset the fiscal impact of the supplementary estimates. (7) The Government may assign to an independent external agency the task of carrying out the periodical review for the compliance of the provisions of this Act in the manner as may be prescribed.

(1) The Government may, by notification in the Official Gazette, make rules for carrying 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 measures for evaluation of fiscal indicators of the Government under clause (f) of section 2; (b) the form of Medium Term Fiscal Plan under sub-section (6) of section 3; (c) the form of statement for disclosure under sub-section (2) of section 6; (d) the form of review report under sub-section (2) of Section 7; (e) Any other matter which is required to be prescribed not inconsistent with the provisions of this Act.

Every rule or order made under this Act shall as soon as possible, after it is made, be placed on the table of the Legislative Assembly and if before the expiry of the session in which it is so placed or in the next session, the Legislative Assembly makes any modification in any such rule or order, or the Legislative Assembly decides that the rule or order should not be made, the rule or order 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 or order.

No suit, prosecution or other legal proceeding shall lie against the Government or any officer of the Government 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 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 or expedient for removing the difficulty. (2) Every order made under this section shall be laid as soon as may be after it is made, before Legislative Assembly.