The JAMMU AND KASHMIR FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2006

FISCAL RESPONSIBILITY
AND BUDGET MANAGEMENT
ACT, 2006
(Act No. XII of 2006)
THE JAMMU AND KASHMIR FISCAL RESPONSIBILITY AND
BUDGET MANAGEMENT ACT, 2006
(Act No. XII of 2006)
CONTENTS
Section.
1. Short title and commencement.
2. Definitions.
3. Fiscal Management Objectives.
4. Fiscal Management Principles.
5. Fiscal Policy Statements to be laid before the Legislature of the Union
territory of Jammu and Kashmir.
6. Macroeconomic Framework Statement.
7. Medium Term Fiscal Policy Statement.
8. Fiscal Policy Strategy Statement.
9. Fiscal Targets.
10. Measures for Fiscal Transparency.
11. Measures of Enforce Compliance.
12. Power to make rules.
13. Rules to be laid before Legislature.
14. Protection of action taken in good faith.
15. Application of other laws not barred.
–––––––
FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT 149
THE JAMMU AND KASHMIR FISCAL RESPONSIBILITY AND BUDGET
MANAGEMENT ACT , 2006
(Act No. XII of 2006)
[Received the assent of the Governor on 9th August, 2006 and published in
Government Gazette dated 14th August, 2006].
An Act to provide for the responsibility of the Government to ensure
prudence in fiscal management and fiscal stability by progressive strengthening
of revenue surplus, reduction in fiscal deficit, prudent debt management consistent
with fiscal sustainability, greater transparency in fiscal operations of the
Government and conduct of fiscal policy in a medium term framework and for
matters connected therewith or incidental thereto.
Be it enacted by the Jammu and Kashmir State Legislature in the year Fifty-
seventh Year of the Republic of India as follows: ––
1. Short title and commencement. ––(1) This Act may be called the Jammu
and Kashmir Fiscal Responsibility and Budget Management Act, 2006.
(2) It shall come into force on such date as the Government may, by notification
in the *[Government Gazette], appoint in this behalf.
2. Definitions.–– In this Act, unless the context otherwise requires,––
(a) ‘Act’ means the Jammu and Kashmir Fiscal Responsibility and Budget
Management Act, 2006 ;
1[(b) ‘budget’ means the Annual Financial Statement laid before the Legislative
Assembly of the Union territory of Jammu and Kashmir under section
41 of the Jammu and Kashmir Reorganisation Act, 2019 (34 of 2019) ;]
(c) ‘current year’ means the financial year preceding the ensuing year ;
(d) ‘ensuing year’ means the financial year for which the budget is
presented ;
(e) ‘financial year’ means the year beginning on the 1st  day of April of a
year and ending on 31st March of the year next following ;
* Now “Official Gazette”.
1. Clause (b) substituted by S.O. 1229 (E) dated 31.03.2020.
150 FISCAL RESPONSIBILITY AND BUDGER MANAGEMENT ACT
(f) ‘fiscal deficit’ is the excess of aggregate disbursements (net of debt
repayments) over revenue receipts, recovery of loans and non-debt
capital receipts ;
(g) ‘fiscal indicators’ are such indicators as may be prescribed for
evaluation of the fiscal position of the Government ;
(h) ‘fiscal targets’ are the numerical ceilings and proportions to total
revenue receipts (TRR) or GSDP for the fiscal indicators ;
(i) ‘GSDP’ means Gross State Domestic Product at current market prices ;
1[(j) ‘Government’ means Government of the Union territory of Jammu and
Kashmir ;]
(k) ‘prescribed’ means prescribed by the rules made under this Act ;
(l) ‘previous year’ means the year preceding the current year ;
(m) ‘revenue deficit’ is the excess of the revenue expenditure over  total
revenue receipts (TRP) ;
Explanation: ––‘Total revenue Receipts’ (TRR) includes State’s own receipts
(both tax and non-tax) and current transfers from the Centre
(comprising grants and State’s share of Central taxes).
(n) ‘revenue surplus’ is the excess of the total revenue receipts over revenue
expenditure ;
(o) ‘total liabilities’ means the liabilities under the Consolidated Fund of
the State and the Public Account of the State and includes borrowings
by the public sector undertakings an the special purpose vehicles and
other equivalent instruments including guarantees where the principal
and/or interest are to be serviced out of the budget.
3. Fiscal Management Objectives.–– The Government shall––
(a) take appropriate measures to strengthen the revenue surplus and
thereafter build up adequate revenue surplus at a sustainable level,
and utilize such surplus for discharging the liabilities in excess of the
assets or for funding capital expenditure ;
1. Clause (j) substituted by S.O. 1229 (E) dated 31.03.2020.
FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT 151
(b) pursue policies to raise non-tax revenue with due regard to cost
recovery and equity ;
(c) lay down norms for prioritization of capital expenditure ; and
(d) expenditure policies that would provide impetus for economic growth,
poverty reduction and improvement in human welfare/standard of life.
4. Fiscal Management Principles.––The Government shall be guided by
the following fiscal management principles, namely: ––
(a) transparency in settling the fiscal policy objectives, the implementation
of public policy and the publication of fiscal information so as to
enable the public to scrutinize the conduct of fiscal policy and the
state of public finances ;
(b) stability and predictability in fiscal policy making process  and in the
manner in which fiscal policy impacts the economy ;
(c) responsibility in the management of public finances, including integrity
in budget formulation ;
(d) fairness to ensure that policy decisions of the Government are
taken having due regard to their financial implications on future
generations ; and
(e) efficiency in the design an implementation of the fiscal policy and in
managing the assets and liabilities of the public sector balance sheet.
5. Fiscal Policy Statements to be laid before the 1[Legislature of the
Union territory of Jammu and Kashmir].––The Government shall in each
financial year lay before 2[Legislative Assembly of the Union territory of
Jammu and Kashmir], the following statements of fiscal policy alongwith
the budget, namely:––
(a) the macroeconomic Framework Statement ;
(b) the Medium Term Fiscal Policy Statement ; and
(c) the Fiscal Policy Strategy statement.
1. Substituted by S.O. 1229 (E) dated 31.03.2020 for “Legislature”.
2. Substituted ibid for “each House of State Legislature”.
152 FISCAL RESPONSIBILITY AND BUDGER MANAGEMENT ACT
6. Macroeconomic Framework Statement.–– The Macroeconomic
Framework Statement, in such form as may be prescribed, shall contain an overview
of the 1[economy of Union territory of Jammu and Kashmir], an analysis of growth
and sectoral composition of GSDP, an assessment related to 2[Government of the
Union territory of Jammu and Kashmir] finances and future prospects.
7. Medium Term Fiscal Policy Statement.–– (1) The Medium Term Fiscal
Policy Statement shall set forth in such form as may be prescribed the fiscal
management objectives of the Government and three year rolling targets for the
prescribed fiscal indicators with clear enunciation of the underlying assumptions.
(2) In particular and without prejudice to the provisions contained in
sub-section (1), the Medium Term Fiscal Policy Statement shall include the
various assumptions behind the fiscal indicators an  assessment of
sustainability relating to––
(i) the balance between revenue receipts and revenue expenditure ;
3[(ii) the use of capital receipts for creation andor maintenance of
productive assets and the borrowings over and above existing fiscal
deficit limit for the purpose of clearing past liabilities and/or creating
fresh assets] ;
(iii) the estimated yearly pension liabilities worked out on actuarial basis
for the next ten years :
Provided that in case it is not possible to calculate the pension liabilities on
actuarial basis during the period of first three years after the enforcement of the
Act, the Government may, during that period, estimate the pension liabilities by
making forecasts on the basis of trend growth rates.
8. Fiscal Policy Strategy Statement.–– The Fiscal Policy Strategy Statement
shall be in such form as may be prescribed and shall contain, inter alia ––
(i) the fiscal policies of the Government for the ensuing year relating to
taxation, expenditure, borrowings and other liabilities (including
borrowings by Public Sector Undertakings and Special Purpose Vehicle
and other equivalent instruments where liability for repayment is on
the Government), lending, investments, other contingent liabilities,
1. Substituted by S.O. 1229 (E) dated 31.03.2020 for “State economy”.
2. Substituted ibid for “State Government”.
3. Clause (ii) of sub-section (2) substituted by Act III of 2018, s. 2.
FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT 153
user charges on public goods/utilities and description of other
activities, such as guarantees and activities of Public Sector
Undertakings which have potential budgetary implications ;
(ii) the strategic priorities of the Government in the fiscal area for the
ensuing year ;
(iii) the key fiscal measures and the rationale for any major deviation in
fiscal measures pertaining to taxation, subsidy, expenditure, borrowings
and user charges on public goods/utilities ; and
(iv) an evaluation of the current policies of the Government viz-a-viz  the
fiscal management principles set out in section 4, the fiscal objectives
set out in the Medium Term Fiscal Policy Statement in sub-section (1)
of section 7 and fiscal targets set out in section 9.
9. Fiscal Targets.––(1) The Government may prescribe such targets as may
be deemed necessary for giving effect to the fiscal management objectives.
(2) In particular, and without prejudice to the generality of the foregoing
provisions, the Government shall––
1[(a) ensure that the revenue surplus of the State is maintained throughout
the award period of the 14th Finance Commission ;]
(b) reduce pre-devolution non-plan revenue deficit by an amount of
equivalent to one percentage point as compared to the previous
financial year beginning from 1st April, 2006 so as to bring it down by
20% of GSDP by 31st 2[March, 2009] and to maintain the level thereafter;
1[(c) maintain fiscal deficit to an annual limit of 3% of GSDP during the
award period for the 14th Finance Commission (2015-2020)] ;
3[(d) reduce outstanding debt as a percentage of GSDP to 56.1 per cent, 55.1
per cent, 53.6 per cent and 51.6 per cent for the years 2010-11, 2011-12,
2012-13 and 1013-14 respectively to reach the target of 49.3 per cent in
the year 2014-15] ;
(e) limit the amount of annual incremental risk weighted guarantees to
75 percent of the TRR in the year preceding the current year or at 7.5
1. Clauses (a) and (c) of sub-section (2) substituted by Act III of 2018, s. 3. (For earlier amendments
to clause (c) see Act VIII of 2011 and Act VII of 2010).
2. Substituted for the word and figures “March, 2010” by Act IV of 2008, s. 2.
3. Clause (d) substituted by Act XVIII of 2011, s. 2.
154 FISCAL RESPONSIBILITY AND BUDGER MANAGEMENT ACT
percent of GSDP of the year preceding the current year, whichever is
lower ;
1[(f) provide for flexible limit of 0.25% over and above the 3% GSDP for any
given fiscal year to which its fiscal deficit is to be fixed if its debt-GSDP
ratio is less than or equal to 25% of the preceding year ;
(g) provide for additional 0.25% of GSDP in a given year for which the
borrowing limits will be fixed if the interest payments are less than or
equal to 10% of the revenue receipt in the preceding year ;
(h) maintain a ceiling on the sanction of new capital works to three times
of the annual budget provision] :
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 arising out of internal disturbance or natural calamity or such
other exceptional grounds as the Government may specify :
Provided however that a statement in respect of the ground or grounds
specified in the first proviso shall be placed 2[before Legislative Assembly
of the Union territory of Jammu and Kashmir], as soon as may be, after such
deficit amount exceeds the aforesaid targets :
3[Provided also that where such deficit amount exceeds the aforesaid
targets on account of unforeseen circumstances arising out of a medical
pandemic or related causes, a statement in respect of this shall be included in
the next Annual Financial Statement or its revision placed before the Legislative
Assembly after such deficit amount exceeds the aforesaid targets.]
10. Measures for Fiscal Transparency.––(1) The Government shall take
suitable measures to ensure greater transparency in its fiscal operations in the
public interest and minimize as far as practicable, secrecy in the preparation of the
budget.
(2) In particular and without prejudice to the generality of the foregoing
provisions, the Government shall, at the time of presentation of the budget, make
disclosures on the following, alongwith detailed information in such forms as may
be prescribed: ––
1. Clause (f), (g) and (h) inserted by Act III of 2018, s. 2.
2. Substituted by S.O. 1229 (E) dated 31.03.2020 for “before each House of State Legislature”.
3. Proviso inserted by S.O. 3808 (E) dated 26.10.2020.
FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT 155
(a) the significant changes in the accounting standards, policies
and practices affecting or likely to affect the computation of
fiscal indicators ;
(b) details of borrowings by way of Ways and Means Advances/Overdraft
availed of from the Reserve Bank of India.
(3) Whenever the Government undertakes to unconditionally and
substantially repay the principal amount and/or pay the interest of any separate
legal entity, it has to reflect such liability as the borrowings of the State.
11. Measures of Enforce Compliance.––(1) The Minister-in-charge of the
Department of Finance (hereinafter referred to as Minister of Finance), shall review
every quarter, the trends in receipts and expenditure in relation to the budget estimates
and place 1[before Legislative Assembly of the Union territory of Jammu and
Kashmir], the outcome of such reviews.
(2) Whenever there is either shortfall in revenue or excess of expenditure
over the intra-year targets mentioned in the Fiscal Policy Strategy Statement or the
rules made under the Act, the Government shall take appropriate measures for
increasing revenue and/or for reducing the expenditure, including curtailment of
the sums authorized to be paid and applied from out of the *[Consolidated Fund of
the State] :
Provided that nothing in this sub-section shall apply to the expenditure
charged on the 2[Consolidated Fund of the Union territory of Jammu and Kashmir
under sub-section (3) of section 41 of the Jammu and Kashmir Reorganisation Act,
2019 (34 of 2019] or any other expenditure, which is required to be incurred under
any agreement or contract, which cannot be postponed or curtailed.
(3) (a) Except as provided under the Act, no deviation in meeting the
obligations cast on the Government under the Act, shall be permissible without
approval of **Legislature.
(b) Where owing to unforeseen circumstances, any deviation is made
in meeting the obligations cast on the Government under the Act, the
Minister of Finance shall make a statement in **[each House of the State
Legislature] explaining––
1. Substituted by S.O. 1229 (E) dated 31.03.2020 for “before each House of State Legislature”.
* Now Consolidated Fund of the Union territory of Jammu and Kashmir.
2. Substituted by S.O. 1229 (E) dated 31.03.2020 for “Consolidated Fund of the State under sub-
section (3) of section 79 of the Constitution of Jammu and Kashmir”.
* * Now Legislature of the Union territory of Jammu and Kashmir.
156 FISCAL RESPONSIBILITY AND BUDGER MANAGEMENT ACT
(i) any deviation in meeting the obligations cast on the Government under
the Act ;
(ii) whether such deviation is substantial and relates to actual or the
potential budgetary outcomes ; and
(iii) the remedial measures the Government proposes to take.
1[(c) Where on account of unforeseen circumstances arising out of a medical
pandemic or related causes, any deviation is made in meeting the obligations cast
on the Government under the Act, a statement in respect of this shall be included
in the next Annual Financial Statement or its revision placed before the Legislative
Assembly explaining––
(i) any deviation in meeting the obligation cast on the Government under
the Act ;
(ii) whether such deviation is substantial and relates to actual or the
potential budgetory outcomes ; and
(iii) the remedial measures the Government proposes to take.]
(4) Any measures proposed in the course of the financial year, which may
lead to an increase in revenue deficit, either through increased expenditure or loss
of revenue, shall be accompanied by a statement of remedial measures, proposed
to neutralize such increase or loss and such statement shall be placed before each
House of the State Legislature.
(5) The Government may set up an agency independent of the Government
to review periodically the compliance of the provisions of the Act and table such
reviews 2[before the Legislative Assembly of the Union territory of Jammu and
Kashmir].
12. Power to make rules.––(1) The Government may, by notification in the
3[Official Gazette], make rules for carrying out the provisions of the 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:––
1. Clause (c) inserted by S.O. 3808 (E) dated 26.10.2020.
2. Substituted by S.O. 1229 (E) dated 31.03.2020 for “in each House of State Legislature”.
3. Substituted ibid for “Government Gazette”.
FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT 157
(a) the form of the Macroeconomic Framework Statement under section 6 ;
(b) the form of Medium Term Fiscal Policy Statement, including the targets
for the fiscal indicators, under section 7 ;
(c) the form of Fiscal Policy Strategy Statement under section 8 ;
(d) the forms for disclosure under sub-section (2) of section 10 ;
(e) measures to enforce compliance ;
(f) the manner of review of compliance of the provisions of the Act by the
independent agency under section 11; and
(g) any other matter which is required to be, or may be, prescribed.
13. Rules to be laid before Legislature.–– Every rule made under the Act
shall be laid, as soon as may be after it is made, 1[before Legislative Assembly of
the Union territory of Jammu and Kashmir], while it is in session, for a total period
of thirty days which may be comprised in one session or in two or more successive
sessions, and if, before the expiry of the session immediately following the session
or the successive sessions aforesaid, 2[the Legislative Assembly] agree in making
any modification in the rule or 2[the Legislative Assembly] agree that the rule
should not be made, the rule 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.
14. Protection of action taken in good faith.–– No suit, prosecution or
other legal proceedings 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.
15. Application of other laws not barred.–– 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.
16. Power to remove difficulties. ––(1) If any difficulty arises in giving effect
to the provisions of the Act, the Government may, by order published in the
1. Substituted by S.O. 1229 (E) dated 31.03.2020 for “before each House of State Legislature”.
2. Substituted ibid for “the Houses”.
158 FISCAL RESPONSIBILITY AND BUDGER MANAGEMENT ACT
1[Official Gazette], make such provisions, not inconsistent with the provisions of
the Act, as may appear to be 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 the Act.
(2) Every order made under this section shall be laid, as soon as may be after
it is made, *[before each House of] the 2[Legislative Assembly of the Union territory
of Jammu and Kashmir].
–––––––
1. Substituted by S.O. 1229 (E) dated 31.03.2020 for “Government Gazette”.
* Words within brackets have become obsolete and need to be omitted.
2. Substituted by S.O. 1229 (E) dated 31.03.2020 for “State Legislature”.

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