The Meghalaya Fiscal Responsibility and Budget Management Act, 2006 (Act No. 4 of 2006)

No. LL(B). 16/2006/42- The Meghalaya Fiscal Responsibility and Budget Management 
Act, 2006 (Act No. 4 of 2006) is hereby published for general information.  
MEGHALAYA ACT NO. 4 OF 2006 
(As passed by the Meghalaya Legislative Assembly) 
(Received the assent of the Governor on the 5h April, 2006) 
Published in the Gazette of Meghalaya Extra-ordinary, issued dated 5h April, 2006 
THE MEGHALAYA FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT 
ACT, 2005 
An 
Act  
To provide for the responsibility of the State Government to ensure fiscal prudence, stability 
and efficiency and also to achieve fiscal consolidation so as to facilitate the generation of 
revenue surplus to enhance the scope for improvement of investment in the social and 
economic sector/infrastructures of the State and to ensure fiscal and debt sustainability 
through progressive reduction of the fiscal deficit and proper debt management system and 
also to provide for a more transparent and accountable system of budgeting that will ensure 
an efficient and effective system of governance. 
Be it enacted by the Legislature of the State of Meghalaya in the Fifty seventh Year of 
the Republic of India as follows:-  
Short title, 1 (1)  This Act may be called the Meghalaya Fiscal Responsibility 
operation and  and Budget Management Act, 2006. 
Commencement    
  (2)  It shall be operative in the whole of Meghalaya.  
   
  (3)  It shall come into force on such date as the Government may, 
  by notification in the Official Gazette, appoint on this behalf.  
   
Definitions  2 In this Act, unless the context otherwise requires:- 
 
(a) ‘Act’ means the Meghalaya Fiscal Responsibility and Budget 
Management Act, 2006 
 
(b) ‘Administrative Approval” means authority to create liability 
and/or incur expenditure;  
 
(c) ‘Budget’ means the Annual Financial Statement laid before the 
House of the Meghalaya Legislative Assembly under Article 
202 of the Constitution. 
 
  (d)  ‘Balance from Current Revenue’ (BCR) or ‘non plan gap’ is the 
difference between total revenue receipt (excluding Plan 
Assistance) and Non-Plan Expenditures; 
 
(e) ‘Current Year’ means the financial year preceding the ensuing 
year; 
 
(f) ‘Ensuing year’ means the financial year for  which the budget 
being presented; 
 
(g) ‘Financial year’ means the year beginning on the 1
st April and 
ending on the 31st March the following year;  
 
(h) ‘Fiscal indicators’ are such indicators as may be prescribed for 
evaluation of the fiscal position of the State Government; 
 
(i) ‘Fiscal targets’ are the numerical ceilings and proportion to 
total revenue receipts (TRR) or GSDP for the fiscal indicators; 
 
(j) ‘Government’ means Government of Meghalaya; 
 
(k) Legislature’ means Legislative Assembly of the State of 
Meghalaya; 
 
(l) ‘GSPD’ means Gross State Domestic Product at current market 
prices; 
 
(m) ‘Previous year’ means year preceding the current year; 
 
(n) ‘Primary Surplus/Deficit’ means the non interest fiscal 
deficit/surplus; 
 
(o) ‘Revenue Surplus/Deficit’ means the difference between 
revenue expenditure and total revenue receipts; and  
 
Explanation: 
 
‘Total revenue receipts’ (TRR) includes State’s own revenue 
receipts (both tax and non tax) and current transfers from the 
Centre (Comprising plan and non plan grants/assistance and 
State shares of Central taxes). 
 
(p) ‘Total liabilities’ means the liabilities under the Consolidated 
Fund of the State and the Public Account of the State and shall 
also include borrowings by the Public Sector Undertakings and 
Special Purpose Vehicles and other equ ivalent instruments 
including guarantees where principal and/or interest are to be 
serviced out of the State Budgets. 
Fiscal management 3 The State Government shall- 
Objectives   
  (a) Undertake appropriate measures to facilitate generation 
  revenue surplus, contain BCR and reduce fiscal deficit in a 
  phased manner and thereafter building up adequate surplus 
  revenue and to utilize the same for the purpose of discharging 
  the liabilities or for developmental expenditures; 
   
  (b)  Pursue policies to raise non tax revenue with due emphasis on 
  cost recovery and equity; 
   
  (c) Lay down norms to prioritize capital expenditure and to pursue 
  expenditure policies that would provide impetus for economic 
  growth wit h social equity and improvement in poverty 
  reduction and human welfare.  
   
Fiscal targets  4 (1)  Government may prescribe such targets as may be deemed 
necessary for giving effect to the fiscal management objectives 
to- 
 
(a) Reduce revenue deficit as a percentage of GSPD in each 
financial year, beginning from 2006- 07, in a manner that 
will enable the State to completely eliminate it by 2008-09; 
 
(b) Reduce fiscal deficit as a percentage of GSDP in each of the 
financial year as per yearly reduction to be indicated under 
the Rules, beginning from 2006- 07, in a manner that will 
enable the State to achieve Fiscal Deficit of 3% of GSDP by 
2008-09 
 
(c) Ensure that total outstanding liabilities on the consolidated 
fund are not more than 28% of the GSDP; 
 
(d) Restrict issuing of guarantees except on selective basis 
where the quality and viability of the scheme to be 
guaranteed is properly analyzed; 
 
(e) Bring out an annual statement that gives a perspective on 
the State’s economy and related fiscal strategy; and 
 
(f) Bring a special along with the budget giving details of the 
number of employees in the Government, Public Section 
undertakings and aided institutions and related salaries; 
 
     Provided that the limits specified above may be exceeded 
on account of unforeseen circumstances such as natural 
calamities, internal disturbances and shortfall in the transfer 
of financial resources from the Government of India. 
  (2)  The reasons for not being able to keep up with commit ments 
  the specified in the Act shall be placed before the House of the 
  State Legislature as soon as may be possible after such limits 
  have been exceeded. 
   
Fiscal Management 5 The fiscal management principles to ensure Fiscal Discipline in the 
Principles to State shall be as follows- 
ensure fiscal  
discipline in the (A) Expenditure Management: 
State.  
i) To rationalize and pursue expenditure policies that 
would provide impetus to economic growth, poverty 
reduction and improvement in human welfare; 
 
ii) Manage the expenditure of the State in relation to its 
receipts potential so as to prevent as f ar as possible 
deterioration in its fiscal position; specially on the 
revenue account; 
 
iii) To make effort to contain non plan expenditure with the 
sole objective of bringing down the deficit on the 
Balance from Current Revenue/Non Plan Gap; 
 
iv) To reduce the expenditure on salaries and wages of the 
Government through an objective analysis on the 
relevancy of the existing posts and to abolish any 
identified vacant redundant posts; 
 
(B) Resource Management: 
 
Tax:- 
 
i) Undert
ake measures to improve
resources with an emphasis on cost r
 
ii) To ensure a reasonable degree
predictability with regard to rates in
 the State’s own 
ecovery; 
 o
f stability and 
 taxes and revenue 
expected from them; 
 
iii) To pursue tax policy with due regard to economic 
efficiency, social equity and compliance cost; 
 
iv) To maintain the integrity of the tax system by 
minimizing special incentives, concessions and 
exemptions; 
 
      
 
        Non -Tax:- 
   
        Pursue non tax policies to increase revenues, with due regard     
        to cost recovery and equity;  
   
  (C) Debt Management: 
   
  i) To ensure that the policy decisions of the Government 
  have due regard to the financial implications on the 
  future generations;  
   
  ii) Maintain Government debt at sustainable level by 
  bringing down the fiscal deficit in a phased manner to 
  the level of 3% of GSDP; 
   
  iii) Manage guarantees and other contingent liabilities 
  prudently with particular reference to the quality and 
  level of such liabilities; 
   
  iv)  To ensure that borrowing are used productive assets 
  and accumulation of capital assets and are not used to 
  finance revenue expenditures; 
   
  (D) Management of Public Sector undertakings:   
   
  Minimize the fiscal risk associated with management of 
  public sector undertakings and utilities providing gods and 
  services through a review of the performance of the State 
  Public Sector Undertakings, including restructuring of those 
  that are absolutely essential and closure of those no longer 
  viable.; 
   
  (E) Budget Management: 
   
  Formulate a realistic budget with due regard to general 
  economic outlook and revenue prospects and minimize 
  deviation during the course of the year; 
   
  (F) Transparency in Fiscal Management: 
   
  Maintain transparency by disclosure of sufficient information 
  to allow public scrutiny on the conduct of fiscal policy and the 
  state of public finances. 
   
   
 
 
 
Measure to ensure 6 (1)  Government or the authorities exercising delegated financial 
Fiscal Discipline. powers shall first issue administrative approval or financial 
sanction, for the work or the order of supply as the case may 
be, in compliance with the existing rules, procedures and 
guidelines and further rules, procedures and guidelines that 
may be prescribed from time to time before awarding any 
work or starting a construction work or awarding an order of 
supply of goods and services which create a liability on the 
Consolidated Fund of the State. 
 
(2) Each Department shall maintain a register of works and order 
of supplies of goods and services, liabilities incurred against 
these works and orders of supplies, liabilities cleared and 
liabilities awaiting clearance, in a format as may be prescribed 
and Government may make rules not so sanction new works if 
the outstanding liabilities in a department exceed such limit as 
may be prescribed. 
 
(3) Government or the appointing authorities under it shall give 
appointments only against sanctioned posts and in accordance 
with the laid down rules, procedures and orders. 
 
Explanation: The appointing authorities under this clause 
shall include the appointing authorities of the autonomous 
bodies including Public Sector Undertakings, Companies, 
Statutory Bodies, Trust, Societies and Co -operative Societies 
under the State Government. 
 
(4) Notwithstanding any other provision contained in any Act or 
Rules, no new post shall be created in any Department of the 
State Government or in Autonomous Bodies including Public 
Sector Undertakings, Companies, Statutory Bodies, Trust 
Societies and Co -operative Societies, which are under the 
State Government, without prior concurrence of the Finance 
Department of Government. 
 
(5) No appointment shall be made by Government or the 
appointing authorities under it in leave vacancies. 
 
(6) Notwithstanding any provision contained in any Act or Rules, 
the select l ist prepared for the fresh appointments to vacant 
sanctioned posts shall contain names equal to the number of 
vacant posts notified at the time of calling for applications for 
filling up the posts plus 10% of that number or two whichever 
is higher. 
 
 
 
Fiscal Policy 7 (1)  Government shall in each financial year lay before the House 
Statement to be of the Legislature the following of fiscal policy along with the 
laid before the budget, namely:- 
legislature.   
(a) Macroeconomic Framework Statement; 
 
(b) Medium Term Fiscal Policy Statement; 
 
(c) Fiscal Policy Strategy Statement; 
 
(2) The Macroeconomic Framework Statement, in such form as 
may be prescribed, shall contain an overview of the State’s 
economy, an analysis of growth and sectoral composition of 
the GSPD, an assessment of Government finances and future 
prospects. 
 
(3) Medium Term Fiscal Policy Statement shall set forth in such 
form as may be prescribed the fiscal management objectives 
of Government and three years’ rolling targets for the 
prescribed fiscal indicators and clear enunciation of the 
underlying assumptions with respect to:- 
 
(a) The balance between revenue receipts and revenue 
expenditure; 
 
(b) The use of capital receipts for generating production 
assets; 
 
(c) The estimated yearly pension liabilities for the next ten 
years on the basis of trend growth rate. 
 
(4) The Fiscal Policy Strategy Statement shall be in such form as 
may be prescribed and shall contain, inter alia:- 
 
i) The fiscal policies of 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 the liability for 
repayment is on Government), lending, investments, 
other contingent liabilities, user charges on publi c 
goods/utilities and guarantees of Public Sector 
Undertakings which have potential budgetary 
implications; 
 
ii) The strategi c priorities of 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; 
   
  iv)  An evaluation of the current policies of Government 
  vis-a-vis the fiscal management principles set out in 
  section 5 the fiscal objectives set out in the Medium 
  Term Fiscal Policy Statement under sub -section 3 of 
  Section 7 and fiscal targets set out in Section 4. 
   
Measures of Fiscal 8 (1)  Government shall take suitable measure to ensure greater 
Transparency.   transparency in its fiscal operations in the public interest and 
  minimize as far as practicable, secrecy in the preparation of 
  the budget; 
   
            Provided that 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 generally of the 
  foregoing provisions, Government shall, at the time of 
  presentation of the budget, make disclosures on the following, 
  along with detained information in such forms as may be 
  prescribed; 
   
  (a) Significant changes in accounting standards, policies and 
  practices affecting or likely to affect the computation of 
  the fiscal indicators; 
   
  (b)  Details of borrowings by ways and Means 
  Advances/Overdraft availed of from the Reserve Bank of 
  India  
   
Measures to 9 (1)  The Minister -in-charge of the Department of Finance 
enforce (herewith referred to as Minister of Finance) shall review, 
compliance.  every quarter, the trend in receipts and expenditure in relation 
to the budget estimates and place before the House of the 
Legislature, 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 rules made under this Act, the 
State Government shall take appropriate measures for 
increasing revenue and/or reducing expenditures. 
 
 
 
  (3)  Except as provided under this Act, no deviation in meeting 
  the obligations cast on Government under this Act shall be 
  permissible without the approval of the Legislature. 
   
  (4)  Where owing to unforeseen circumstances any deviation is 
  made in meeting the obligat ions cast on Government under 
  this Act, the Minister of Finance shall make a statement 
  before the Legislature explaining:- 
   
  (a) Any deviation in meeting the obligations cast on 
  Government under this Act; 
   
  (b)  Remedial measures that Government proposes to take 
   
  (5)  Any measures proposed in the course of the financial year, 
  which may lead to an increase in revenue deficit, either 
  through increase in expenditure or loss of revenue, shall be 
  accompanied by a statement or remedial measures, proposed 
  to neutralize such increase or loss and such statement shall be 
  placed before the House of the Legislature. 
   
  (6)  Government may set up an agency independent of the 
  Government to review periodically the compliance of the 
  provisions of this Act and table such review in the House of 
  the Legislature.  
   
Power to make 10 (1)  Government may, by notification in the Official Gazette, 
rules.  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 form of the Macroeconomic Framework statement 
under sub-clause (a) of sub-section (1) of section 7; 
 
(b) The form of Medium Term Fiscal Statement, including 
the targets for the fiscal indicators clause (b) of sub -
section (1) of section 7. 
 
(c) The form of Fiscal Policy Strategy Statement sub -section 
(4) of section 7. 
 
(d) The form for disclosure under sub-section (2) of section 8; 
 
(e) Measures to enforce compliance; 
 
 
  (f) The manner of review of compliance of the provisions of 
  the Act by the independent agency under sub- section (6) 
  of section 9; and 
   
  (g)  Any other matter which is required to be prescribed. 
   
  (3)  Every rule made under this Act shall be laid, as soon as may 
  be after it is made, before the House of the Legislature.  
   
Protection of action 11 No suit, prosecution or other proceedings shall lie against the 
taken in good faith.  State Government or any Officer of the State Government for 
  anything done or intended to be done in good faith under this Act 
  or the rules made there under.  
   
Application of 12 Except as provided in this Act, the provisions of this Act, shall be 
other laws not  in addition to, and not in derogation of, the provisions of any 
barred.    other law for the time being in force. 
   
Power to remove 13 (1)  If any difficulty arises in giving effect to the provisions of this 
difficulties.  Act, Government may, by an order published in the Official 
Gazette, make such provisions not inconsistent with the 
provisions of this Act, as may appear to  be necessary for 
removing the difficulty; 
 
           Provided the no order shall be made under this section     
after 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 House of the Legislature.  
 
 
 
 
                                                                                                   L. M. SANGMA, 
                                                                              Joint Secretary to the Govt. of Meghalaya, 
                                                                                                 Law (B) Department.  
 
 
 

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