The Uttarakhand fiscal responsibility and Budget Management Act

1. (1) This Act may be called the Uttarakhand Fiscal Responsibility and Budget Management Act, 2005. (2) It shall come into force on such date as the State Government may, by notification in this behalf, appoint.

In this Act, unless the context otherwise requires---- (a) “annual budget” means the annual financial statement laid before the house of State Assembly under Article 202 of the constitution; (b) “current year” means the year preceding the year for which budget is being presented; (c) “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 Fund (excluding the debt receipts) during a financial year, or (ii) total expenditure from the consolidated Fund of the State (including loans but excluding repayment of debt) over own tax and non-tax revenue receipts, devolution and other grants from 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 to State Government during the financial year; (d) “Fiscal Indicators” means the measures such as numerical ceilings and proportions to gross State domestic product or any other ratios, as may be prescribed, for evaluation of the fiscal position of the State Government; (e) “previous year” means the year preceding the current year; (f) “revenue deficit” means the difference between revenue expenditure and revenue receipts; (g) “total liabilities” means the liabilities under the consolidated Fund of the State and the public account of the State. (h) “Interest Payment’ means the amount payable other than refund of principal amount on the internal debt of the State Government from the Central Government and on State provident funds and other liabilities in the public account.1 --------------------------------------------------------

1. (1) The State Government shall in each financial year lay before the State Assembly a Medium Term Fiscal policy along with the annual budget. (2) The Medium Term Fiscal Policy shall set forth a three year rolling targets for the prescribed fiscal indicators with specification of under lying assumptions. (3) In particular and without prejudice to the provisions contained in sub-section (2), the Medium Term Fiscal Policy 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 Policy shall, inter-alia contain— (a) the medium term fiscal objectives of the State Government; (b) an evaluation of performance on the basis of the prescribed fiscal indicators vis-a-vis the targets set out in the budget and the likely performance in the current year as per revised estimates; (c) a statement on recent economic trends and future prospects for growth and development affecting fiscal position of the State Government; (d) the strategic priorities of the State Government in the fiscal areas for the ensuing financial year; (e) the policies of the State Government for the ensuing financial year relating to taxation, expenditure, borrowings and other liabilities, lending and investments, pricing of administered goods and services, guarantees and activities of Public Sector Undertakings which have potential budgetary implications; and the key fiscal measures and targets pertaining to each of these; (f) an evaluation as to how current policies of the State 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 Policy. (5) The Medium Term Fiscal Policy shall be in such form as may be prescribed.

1. (1) The State Government shall be guided by the following fiscal management principles:- (a) To maintain 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 Government have due regard to their financial implication on future generation; (d) To ensure that borrowings are used on development activities, which are evaluated to become self-sustained, and creation or augmentation of capital assets, and are not applied to finance current expenditure. (e) To ensure a reasonable degree of stability and predictability in the level of tax burden; (f) To maintain the integrity of the tax system by minimising special incentives, concessions and exemptions; (g) To pursue tax polices with due regard to economic efficiency and compliance costs; (h) To pursue non-tax revenue policies with due regard to cost recovery and equity; (i) To pursue expenditure policies that would provide impetus to economic growth, poverty reduction and improvement in human welfare; (j) To build up a revenue surplus for use in capital formation and productive expenditure; (k) To ensure that physical assets of the Government are property maintained; (l) To disclose sufficient information to allow the public to scrutinize the conduct of fiscal policy and the state of public finance; (m) To ensure that Government uses resources in ways that give best value for money and also ensure that public assets are put to best possible use; (n) To minimize fiscal risks associated with running of public sector undertakings and utilities providing public goods and services; (o) To manage expenditure consistent with the level of revenue generated; (p) To formulate budget in realistic and objective manner with due regard to the general economic outlook and revenue prospects and minimize deviations during the course of the year; (q) To ensure discharge of current liabilities in a timely manner. (2) The State Government shall take appropriate measures to eliminate the revenue deficit and control the fiscal deficit at sustainable level and built up adequate revenue surplus. (3) In particular, and without prejudice to the generality of the foregoing provisions, the State Government shall— (a) reduce the revenue deficit to nil in the four years starting from 01 st April, 2011 and ending on 31st March, 2015; 1 (b) reduce revenue deficit as percentage of Gross State Domestic product in each of the financial years referred to a clause (a) in a manner consistent with the goal set out in clause (a); (c) (1) The Fiscal deficit targets and annual borrowing limits for the State during the period 2016-17 to 2019-20 are enunciated as follows- (i) Fiscal deficit of the State will be anchored to an annual limit of 3 percent of GSDP. The State will be eligible for flexibility of 0.25 percent over and above this for any given year for which the borrowing limits are to be fixed if the debt- GSDP ratio is less than or equal to 25 percent in the preceding year. (ii) The State will be further eligible for an additional borrowing limit of 0.25 percent of GSDP in a given year for which the borrowing limits are to be fixed if the interest payments are less than or equal to 10 percent of the revenue receipts in the preceding year. (iii) The two options under these flexibility provisions can be availed can be availed by the State either separately, if any of the above criterion is fulfilled, or simultaneously if both the above stated criterion are fulfilled. Thus, the State can have a maximum fiscal deficit GSDP limit of 3.5 percent in any given year. (iv) The flexibility for availing the additional limit under either of the two options or both will be available to the State only if there is no revenue deficit in the year in which borrowing limits are to be fixed and the immediately preceding year. (2) If the State is not able to fully utilize its sanctioned borrowing limit of 3 percent of GSDP in any particular year during the financial year between 2016-17 to 2018-19 it will have the option of availing this unutilized borrowing amount (calculated in Rs.) only in the following year within the fourteenth finance commission award period of 2017-18 to 2019-20. The amount including unutilized borrowing amount will be limited to 3-5 of GSDP. 1 (d) reduce fiscal deficit as percentage of Gross State domestic product in each of the financial years referred to in clause (a) in a manner consistent with the goal set out in clause (c); (e) not to give guarantee for any amount exceeding the limit stipulated under any rule or law of the State Government existing at the time of the coming into force of this Act or any rule or law to be made by the State Government subsequent to coming into force of this Act; (f) ensure that during the period of four financial years starting form 1st April, 2011 and ending on 31st March, 2015 the total estimated debt liability does not exceed 41.10, 40.00, 38.50 and 37.20 percent respectively of its estimated gross state domestic product: Provided that revenue deficit and fiscal deficit may exceed the limits specified under this sub-section due to ground or grounds of unforeseen demands on the finance of the State Government due to internal security or natural calamity, subject to the condition that the excess beyond limits arising due to natural calamities does not exceed the actual fiscal cost that can be attributed to the calamities: Provided further that the ground or grounds specified in the first proviso shall be placed before the State Legislature, as soon as possible, after it becomes likely that such deficit amount may exceed the aforesaid limits, with accompanying report stating the likely extent of excess, and reasons therefor;2 (g) The State Government shall constitute a committee under the chairmanship of the Chief Secretary, to review the progress against above targets at least once every six months.3

1. (1) The State Government shall take suitable measures to ensure greater transparency in its fiscal operation in public interest and minimize as far as practicable in public interest, secrecy in the preparation of the annual budget. (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 budge, disclose in a statement in the form as may be prescribe:- (a) the significant changes in the accounting standards, policies and practices affection or likely to effect the computation of prescribed fiscal indicators; (b) as far as practicable, and consistent with protection of public interest, the contingent liabilities created by way of guarantees, the actual liabilities arising out of borrowing by Public Sector Undertaking and Special Purpose Vehicles and other equivalent instrument where liability for repayment is on the State Government, allocation and commitments made by the State Government having potential budgetary, implication including revenue demand raised but not realized, tax expenditure; losses incurred in providing public goods, and services through public utilities and undertaking, liability in respect of major works and contracts, and subsidy payments and impact of the same on the fiscal position of the State including in relation to the targets referred to in sub-section (3) of section 4.

1. (1) The Annual Budget and policies announced at the time of the budget, shall be consistent with the objectives and targets specified in the Medium Term Fiscal Policy for the coming and future years. (2) The Minister In-charge of the Department of Finance, shall review, every half yearly, the trend in receipts and expenditure in relation to the budget, remedial measured to be taken to achieve the budget targets, and place before the State Legislature the outcome of such reviews. The review report shall be in such form as may be prescribed. (3) The review shall explain--- (a) any deviation or likely deviation in meeting the obligations cast on the State Government under this Act; (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 (c) the remedial measures the State Government proposes to take. (4) Wherever 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, State Government, prior to taking such policy decision, shall take measures to fully offset the fiscal impact for the current and future years by curtailing the sums authorized to be paid and applied from and out of the consolidated Fund of the State under any Act 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: Provided further that, while adhering to the fiscal years, the State Government will give priority to protect certain expenditure defined in the Medium Term Fiscal Restructuring Policy as “High Priority Development Expenditure” (including, inter alia) from curtailment or may impose a recede or partial curtailment. (5) Whenever one or more supplementary estimates are presented to the State Assembly, the State Government shall also present an accompanying statement indicating the corresponding curtailment of expenditure and/ or augmentation of revenue to fully offset the fiscal impact to the supplementary estimates in relation to the budget targets of the current year and the Medium Term Fiscal Policy objectives and targets for the future year.

1. (1) The State Government may, by notification, make rules for carrying out the provisions of this Act. (2) In particular, and without prejudice to the generality of the foregoing powers such rules may provide for all or any of the following matters, namely:- (a) The fiscal indicator to be prescribed for the purpose of sub-section (2) of section 3 and clause (a) of sub-section(2) of section 5; (b) The term of the Medium Term Fiscal Policy referred to in section 3; (c) Any other matter which is required to be, or may be prescribed.

No suit or prosecution or other legal proceeding shall be 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 the rules made thereunder.

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

1. (1) If any difficulty arises in giving effect to the provisions of this act, the State Government may, be order published in the Gazette make such provisions not inconsistent with the provisions of this Act as it may deem necessary for removing the difficulty: Provided that no 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 State Assembly.