Punjab act 011 of 2003 : The Punjab Fiscal Responsibility and Budget Management Act

' @YER'NMENT ^OF

PUNJAB

ml of

Legal and LegislatiVe Affairs '

I"

f

NJAB FISCAL RESPONSIBILITY

AND

'DGET

MANAGEMENT ^{ACT, 2003}

D-

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1"(PUNJAB ^ACTllOF

2003)

at.» \as

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.39

Printed ^at

Govt.

Press, ^U.T.

Chandigarh. 'mtu-ou.

1

THE

PUNJAB

FISCAL RESPONSIBILITY ^AND

BUDGET MANAGEMENT

ACT, ²⁰⁰³

(PUNJAB ^{ACT 11 or}

2003)

'

ection CONTENTS ; Page -'

Short

title and commencement,

2. Definitions. FiScal

policy

statement ^tobelaid

before5"

the

Legislative Assembly. 3-P-

Fiscal

management principles, Measures for

fiscal

tranSparency. Measures ^toenforce

compliance. -

Power to make rules, Protection of

action taken ⁱⁿ

good

faith. Application ^of

other ^{laws not}barred. 999°HP'P' PoWer

to remove difficulties. -

"are

2

r9"

'

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, I,

I

l"IKE?SPJUNJAB

FISCAL RESPONSIBILITY ^ANDBUDGET

MANAGEMENT

(ACT. ²⁰⁰³

(PUNJAB ^ACT11OF

2003)

ecaived ^the

assent^oftheGavernor^of

Punjab ^{on the1st day of} H2003 ^{and was}first

published ^for

general

information in

Punjab rnment

Gazette

(Extraordinary),

Legislative Supplement dated the

May, ^{2003 1}

Act ^to

pmvide

for ^the

responsibility

of ^the

State

Government ^to

ensure

"

neratianal

equity ⁱⁿ

fiscal management ^and

long-term:financial ty by

achieving

sufficient

revenue

surplus,

containing

fiscal

deficit

,

dential debt

management

consistent with

fiscal

sustainability 3'3""lin'tits ^an

the

State Government

borrowings, ^debtand

deficits. transparency ⁱⁿfiscal

operations of ^theState

Government^and ing

fiscal

policy ^inamedium'term

framework ^{and for}

matters t

herewith

or incidental thereto. it enacted

by

the

Legislature

of the State

of

Punjab

in urth Year^ofthe

Republic ^ofIndia ^as

follows^:— '

) ^ThisActmay^becalled^the

Punjab

Fiscal

Responsibility Management ^Act,2003

2) ^It

shall ^{come into}three ^onsuchdate3 ^{as the}State htlfmay,

by

notification ^inthe

Official Gazette,

appoint '

a .

,

his

'Act,

unless the

context otherwise

requires.—- v

merit laid

before

the

Punjab

Legislative

Assembly

under y'article ^{202 ofthe}Constitution^ofIndia ;

"fiscal

deficit"

means^theexcess^of

eXpenditure, '

revenue

expenditure

and

capital expenditure

including loans, ^netof

recoveries, ^overtherevenue

receipts

and non-debt

capital

receipts. ^{It is,}

however.^made

clear ^that for ^thepurpose^ofthis

definition, ^off

budget

borrow- gs Vshall

be

treated ^as

borrowings by, '

the

"annual

budget"

means^theannual financial

state-* '

ent ^of

Objects ^and

Reasons; ^see

Punjab

Government

,

.._aitEmmrdinary)

dated the 25th June, 2002, page 1298.

I

"Act Ii'as ^{come into}force^{onand with}

effect^{from5th day of} 3-—-vida

GOVernment ^of

Punjab,

Department ^ofFinance, w

No.

l

(5)5302/5FE4/9866,

dated he

22nd

December,

2003.

Short title and

commencement Definitions.

3

2

State

Government,

and

the

expenditure

incurred on

subsidies

due to

the

enterprises

in the

power sector.

A

it whether

paid ^or

not. shall ^betreated ^as

expenditure

by the

State

Government ; (c)

"fiscal indicators" means ^the

measures ^{such as} numerical

ceilings ^and

proportions ^togross domestic pro- duct, ^as

may^be

prescribed, ^{for the}evaluation ^ofthe;fiscal position ^ofthe

State

Government^;

(41) ^"off

budget

borrowings" means. borrowings ^{by the} State

Government ^or

its

Agencies

which ^are

not reflected in the

Budget ; '

(e) "prescribed"

means

prescribed ^by

rules^madeunder this Act ; (f)

"ReserVe Bank"

means ^theReserve^BankofIndia constituted tmder

sub-section

(1) ^ofsection ^3ofthe Reserve

Bank

of

India Act, ¹⁹³⁴

(Act2

of

1934) ^:

(g)

"revenue deficit"

means ^thedifference

between revenue

expenditure

and

revenue

receipts,

which

indicates increase ⁱⁿ

liabilities of the State Government without correSponding

increase ⁱⁿassets^oftheState

Government. It

is, however,

made

clear ^thatfor the

purpose

of calcu- lating

revenue deficit.

expenditure

incurred^onsubsidies due to

the

enterprises

in the power

sector, whether

Paid or

not.

shall

be treated ^as

expenditure

incurred

by

the State

Government :

(h)

"State

Government"

means^theGovernment^{of the} State ^of

Punjab ^inthe

Department ^ofFinance^;and (i)

"total liabilities"

means^theliabilities

under^theCon- solidated ^Fundofthe

State^andthe

public

account^of the State referred to in

article ^266of

the Constitution of

India.

"5""

901"? 3.

(1)

The

State Government Shall

lay

in

each financial year statement to

be

before the

Punjab

Legislative Assembly,

the Medium—term

Fiscal ridge?"

the

Policy

Statement

alongwith

the

annual

budget.

5

atlve Asian", ^{(2) The}Medium-term Fiscal

Policy

Statement shall^setforth ^a three-year rolling target ^for

prescribed

fiscal

indicators ^with

specification of

underlying

aesumptions.

(3) ^In

particular ^and

without

preiudice ^tothe

provisions

contained in sub-section

(2), ^the

Medium-term

Fiscal

Policy

Statement

shall include ^an

assessment of

sustainability

relating ^to,—

(i) ^thebalance between

revenue

receipts ^and

revenue expenditures; (it): ^{the use of}

capital

receipts

including

market

borrowings fer

generating

productive

assets;

3

(it!) ^theevaluation ^of

performance ^{of the}

prescribed

fiscal indicators ^inthe

previous

year

vis-a-vis^the

targets ^set out earlier

and

the

likely

performance

in the current financial year ^as

per the

revised

estimates; ^and (Ir) ^thestatement^onrecent economic

trends^andfuture prospects ^for

growth ^and

development,

afl'ecting ^thefiscal position ^{of the}

State Government.

(4) ^The

Medium ^TermFiscal

Policy

Statement

shall,

inter^alia '

contain, ^—

(i) policies ^oftheState Government^{for the}

ensuing

financial year relating ^to

taxation,

expenditure,

market

borrowings and other liabilities

(inclu

ling off-budget borrowings), lending ^and

investments,

pricing ^of

administered

goods and

services,

securities

and.

description

of other

activities, such as,

guarantees

and activities

of

Public

Sector

Under- takings

which ^have

potential budgetary

implications;

(ii) ^the

strategic

priorities ^ofthe

State

Government^forthe ensuing

financial year in'the fiscal area;^and

(iii) ^{the key}

fiscal measures^andrationale^{for any}major deviation in

fiscal measures

pertaining ^to

taxation,

sub- sidy,

expenditure,

administered

pricing ^and

borrowings.

(5) ^The

Medium-term

Fiscal

Policy

Statement

shall ^beinsuch ,form, ^as

may^be

prescribed.

4.

(I)

The State Government

shall

take

appropriate

measures to eliminate the

revenue

deficit and

contain fiscal

deficit.

(2) ^In

particular, ^and

without

prejudice ^tothe

generality ^ofthe

,

foregoing

provision,

the State

Government

shall,— (a)

contain^{therate of}

growth ^offiscal deficit ^{to two}

per cent

per

annum in

nominal

terms,

until

fiscal

deficit

is brought ^{down to}

3% ^of

GSDP; (b)

reduce revenue

deficit, ^as

per ^{cent of}total revenue receipts, by ^at

least ^fivepercentage

points, ^fromthe previous

year, until revenue

balance ^is

achieved^;

(c) bring ^theratio ^{ofdebt to}Gross State

Domestic

Product down ^to

forty per

cent to

be

achieved

by 2006-07 ; and ((1) cap

outstanding

guarantees ^on

long ^termdebtto

eighty per cent of revenue

receipts ^ofthe

previous year guarantees ^on

short^termdebttobe

given only

for

working capital ^{or food}credit ⁱⁿ

which ^{case thismustbe}

fully backed

by

physical

stocks. Fiscal management principles.

Measures

for fiscal transparency. announced

proposals

of

either

party,

with a

view

to

facilita public

debate. ^-

(4) ^{No act,}which may^leadto

increase ⁱⁿ

the

expenditure; Government

employees,

remission ⁱⁿState

revenue^or

which ^2.- result in credit

operations

based on future revenue, other tha normal open market and other

borrowings

of the

State Govern

"

conducted

through ^the

Reserve

Bank,

shall be undertaken

with, period ^{of six}

months

before^the

general

elections^{to the}

Pu:_- Legislative

Assembly

become due. '

(5) Notwithstanding anything

contained'in

sub-section

(2), "f revenue deficit and fiscal deficit may be exceeded

in

the

ca unforeseen demands on

the

finances of the State Government 6 calamity

declared

by ^the

State

Government ^orthe

Central"

60'} merit, ^{as thecase}

may be.

',

(6) ^{Incase the}revenue deficit^andfiscal deficit

specf in

sub-section

(2),

cannot be met

due

to

aforesaid

calamity; State

Government shall

identify

the

net

fiscal cost of the calm and

such cost

would

provide ceiling

for extent of

non-compli v

to the

specified

limits.

5.

(I)

The

State

Government

shall

take suitable

measu enSure

greater

transparency

in its

fiscal

operations

in

public

in and

minimize,

as far as

practicable, secrecy in

the

preparation

of» annual

budget. ^"3

(2) ^In

particular, ^and

without

prejudice ^{to the}

generality ^of foregoing

provision, ^the

State Government

shall, ^{at thetime o} sentation of

the annual

budget,

disclose

in

a

statement, in

the as

may be

prescribed,—

(a) ^the

significant

changes ^inthe

accounting

stand policies ^and

practices

affecting ^or

likely ^to

affect computation ^ofthe

prescribed

fiscal

indicators;

(b) ^asfaras

practicable ^and

consistent ^withthe

protec of

public

interest,

the

contingent

liabilities

created ^u way of

guarantees,

all claims and commitments made

1

the State

Government.

having

potential

bud

5

implications. including

revenue demands

raised, ^butnot ;

T'

realized and

tax arrears, and

liability incurred,

but not

paid.

6.

(1)

The

Minister-in-charge

of the

Department

of

Finance. ,shall review,

after every quarter,

the

trends in

receipts

and

expen- :diture in

relation

to

the

budget

and

place

before the

Punjab Legislative

Assembly ^the

outcome^ofsuch

reviews.

(2) ^In

particular, ^andwithout

prejudice ^tothe

generality ^of f ^the

foregoing provisions,

the ^said

Minister shall make ^a

statement

V

explaining,—

(a) ^anydeviationⁱⁿ

meeting ^the

obligations ^castonthe State Government under

this

Act; (b)

whether^such

deviation ^is

substantial and relates ^tothe actual or

the

potential budgetary outcomes;

and

(c) ^theremedial measures,^theState

Government

proposes to

take. '

(3)

Whenever there is

either

shortfall in revenue

0r excess of f

expenditure

over

the

prescribed

levels

during

any

period

in

a

financial' year, the State

Government shall

proportionately

curtail the sums,

1

authorized ^{to be}

paid

and

applied

from

and

out of

the

Consolidated Fund ^oftheState

under any Act enacted

by

the

Punjab

State

,

Legislature

to

provide

for the

appr0priation

of

such

Sums

2

.

Provided that

nothing

in this

sub-section

shall

apply

to

the i

expenditure charged ^onthe Consolidated

Fund

of the

State

under

5

clause

(3)

of

article

202

of the

Constitution.

.

(4)

Whenever

outstanding guarantees

exceed

the limits

specified' in

clause

(d)

of

sub-section

(2)

of

section 4,

no

fresh

guarantee shall be

giVen except

for

the purposie of

replacing

high

cost debt

with low cost^debtin such a

way that

there

is no net

increase in out- standing guarantees after ^{such debt}swap.

(5) ^No

department ^{of the}

State Government

shall allow any liabilities,

which^have

become

due, ^to

remain

unpaid

for a

period ;,of ^{more than}

three months or^to

incur

fresh

liabilities,

if

previously 3 incurred

liabilities,

have remained

unpaid

for a

period

0f more than three

months.

. (6)

Any

measure

proposed

in the

course

of the

financial year, :which may

lead to an

increase

in revenue

deficit,

either

through »fenhanced eXpenditures

or

loss

of revenue, shall be

accompanied by remedial measures, which will neutralize such

increase or loss

and such measures

shall

be

clearly

mentioned.

1

Meat'ures enfo Ce com; fiance ^. t0

.

.:.

as, ;

.9

POWer ^to make rules. Protection ^of section taken in

good

faith.

6

(7) ^TheState Government may assign ^an

independent external agency to

carry

out the

periodic

review for

the

compliance

of

"the provisions ^{ofthisActinthe}manner^as

may^be

prescribed.

7.

(I)

The

State Government may. by

notification

in

the

Official Gazette, ^makerules^for

carrying ^{out the}

provisions

of this Act.

(2) ^In

particular, ^and

without

prejudice ^tothe

generality ^ofthe foregoing power,^suchrules may

provide ^{for allor}

any^ofthe following

matters,

namely ^:—

(a) ^the

fiscal

indicators ^tobe

prescribed ^forthepurpose^of sub-section

(2) ^ofsection ³

and clause

(a)

of sub-section

f

(2) ^of

section ^5!

(b) ^{the form of the}

Medium-term

Fiscal

Policy

Statement. referred ^to

in sub-section

(5)

of section

3;

(c) ^{the form of}

statement

under

sub-section

(2) ^of

section 5 ; _

(d) ^thelevels

referred

toin.

"Wm

1(3) ^of

section ^6;

(e) ^the

periodic

review ^byan

9

t

external

agency under sub-section

(7)

of section6; and" w: w :

(f) ^anyother

matter, which ism W MMIM

be. prescribed ^{i'are mm". :4}

31116111811,» £31..

31313"!ⁱⁿ

(133"?

iii;

(3)

Every ^rulemadeunder this Actshall ^be

laid, ^assoon^as

may

I

be,

after^itis

made,

before ^the

House.oflmvsmte 91W.

while it

is

in

session,

for

a

total

period

»of

Ween «lays.

Whichmay be

comprised ^inone

session ^orintwoor'mere oucesssive sessions, ^and if,

before ^the

expiry ^{of the}

session ⁱⁿwhich ^it

is ^solaidor.the successive

sessions as

aforesaid, the Houseéastees,

in

making any modification in the

rules, ^orthe House agrees,^thattherules

should not be

made,

the rules shall

thereafter

have effect

only

inl

such modified ^formor be^of

no effect, ^asthe casc_^maybe,

however, that any such

modification ^orannulment shall

be without

prejudice

totli'e validity ^of

anything

previously ^{done or}omitted ^tobedoneunder that

rule.

8. No

suit,

prosecution ^orother

legal

proceedings

shall

lie

against the State

Government ^or

any officer

of the State Government for anything,

which^{is in good}

faith ^{don e or}intended ^{tobe done}

under

'l u

l

I

)

7?

/

7

9.

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.

10.

(I) ^Ifany diffiCulty

arises

in

giving

effect to the

provisions

of this

Act, ^theState

Government may,

by

order

published

in the Official Gazette, ^makesuch

provisions

not

inconsistent with the provisions ^{of this Act, as}

may

appear- ^tobe

necessary

for

removing the

difficulty

I

Pruvided that no order shall be made under

this section after the

expiry

of ^a

period

of twa

years from the commencement of this Act.

(2)

Every

order^madeunder ^this

section,

shall ^be

laid,

as soon as

may be,

after it is

made,

before

the

House

of the State

Legislature.

5766

LR/P——Govt, Press,

U,T, Chd, Application of other

laws not

barred. Power to remove difficulties. o,