LexThe Telangana Fiscal Responsibility and Budget Management Act, 2005.
Telangana · state statute
Open in Lexace · Ask the AI about this actTHE TELANGANA FISCAL RESPONSIBILITY AND BUDGET
MANAGEMENT ACT, 2005.
(ACT NO. 34 OF 2005)
ARRANGEMENT OF SECTIONS
Sections
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.
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 to enforce compliance.
12. Protection of action taken in good faith.
13. Application of other laws not barred.
14. Power to remove difficulties.
15. Power to Make Rules.
16. Repeal of Ordinance.
THE TELANGANA FISCAL RESPONSIBILITY AND BUDGET
MANAGEMENT ACT, 2005.1
ACT No.34 OF 2005.
1. (1) This Act may be called the 2Telangana Fiscal
Responsibility and Budget Management Act, 2005.
(2) It shall be deemed to have come into force with
effect on and from the 3rd June, 2005.
2. In this Act, unless the context otherwise requires,-
(a) “budget” means the annual financial statement laid
before the House or Houses of the State Legislature under
article 202 of the Constitution;
(b) “current year” means the financial year preceding
the ensuing year;
(c) “ensuing year” means the financial year fo r which
the budget is being presented;
(d) “financial year” means the year beginning on the 1 st
April and ending on 31st March next following;
(e) “GSDP” means Gross State Domestic Product at
current market prices;
1. The Andhra Pradesh Fiscal Responsibility and Budget Management
Act, 2005 received the assent of the Governor on the 2 5th October, 2005.
The said Act in force in the combined State, as on 02.06.2014, has been
adapted to the State of Telangana, under section 101 of the Andhra
Pradesh Reorganisation Act, 2014 (Central Act 6 of 2014) vide. the
Telangana Adaptation of Laws Order , 2016, issued in G.O.Ms.No.45,
Law (F) Department, dated 01.06.2016.
2. Substituted by G.O.Ms.No.45, Law (F) Department, dated 01.06.2016.
Short title and
commencement.
Definitions.
2 [Act No.34 of 2005]
(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 State
Government;
(h) “fiscal targets” are the numerical ceilings and
proportions to total revenue receipts (TRR) or GSDP for the
fiscal indicators;
(i) “prescribed” means prescribed by the 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 total revenue receipts (TRR);
Explanation:- „Total revenue receipts ‟ (TRR) includes
State‟s own revenue receipts (both tax and non -tax) and
current transfers from the Cent re (comprising grants and
State‟s share of Central taxes).
3[(ka) “stage-1 sanctions ” means the administrative
approval accorded for the following items which will help in
preparation of detailed project reports,-
(i) Detailed investigation;
(ii) Preparation of EIA and EMP reports, R&R plan,
forest clearance etc.,;
3. Inserted by Act No.3 of 2014.
[Act No.34 of 2005] 3
(iii) Preparation of detailed designs/drawings;
(iv) Obtaining of necessary clearances;
(v) Acquisition of minimum lands required;
(vi) Completion of R & R and EMP etc.,;
(vii) Shifting of utilities for R&B Works;]
(l) “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 the special purpose vehicles and
other equivalent instruments including guarantees where the
principal and/or interest are to be serviced out of the State
budgets.
3. The State Government shall,-
(a) take appropriate measures to eliminate the revenue
deficit and thereafter build up adequate revenue surplus and
contain the fiscal deficit at a sustainable level and utilize
such surplus for discharging the liabilities in excess of the
assets or for funding capital expenditure;
(b) pursue policies to raise non -tax revenue with due
regard to cost recovery and equity; and
(c) lay d own norms for prioritisation of capital
expenditure and pursue expenditure policies that would
provide impetus for economic growth, poverty reduction
and improvement in human welfare.
Fiscal
Management
Objectives.
4 [Act No.34 of 2005]
4. The State Government shall be guided by the following
fiscal management principles, namely,-
(a) transparency in setting the fiscal policy objectives ,
the implementation of public policy and the publication of
fiscal information so as to enable the public to scrutinise the
conduct of fiscal policy and the state of public finances;
(b) stability and predictability in fiscal policy making
process and in the way 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 State
Government have due regard to their financial implications
on future generations; and
(e) efficiency in the design and implementation of the
fiscal policy and in managing the assets and liabilities of the
public sector balance sheet.
5. The State Government shall in each financial year lay
before the House/Houses of the Legislature, the following
statements of fiscal policy along with the budget, namely:-
(a) the Macroeconomic Frame work Statement;
(b) the Medium Term Fiscal Policy Statement; and
(c) the Fiscal Policy Strategy Statement;
4[(d) the statement on the number of employees in
Government, Public Sector Undertakings and aided
4. Added by Act No.15 of 2006.
Fiscal Policy
Statements to be
laid before the
Legislature.
Fiscal
Management
Principles.
[Act No.34 of 2005] 5
institutions and expend iture of State Government towards
salaries and pensions.]
6. The Macroeconomic Framework Statement, in such
form as may be prescribed, shall contain an overview of the
State economy, an analysis of growth and sect oral
composition work of GSDP, an assessment related to State
Government finances and future prospects.
7. (1) The Medium Term Fiscal Policy Statement shall set -
forth in such form as may be prescribed the fiscal
management objectives of the State 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 and an assess ment 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;
(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 coming into force of this Act, the State
Government may, during that period, estimate the pension
liabilities by making forecasts on the basis of trend growth
rates.
Macroeconomic
Framework
Statement.
Medium Term
Fiscal Policy
Statement.
6 [Act No.34 of 2005]
8. The Fiscal Policy Strategy Statement shall be in such
Strategy form as may be prescribed and shall contain, inter
alia,-
(i) the fiscal policies of the State 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
State Government), lending, investments, other contingent
liabilities, 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 State 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 ch arges on
public goods/utilities; and
(iv) an evaluation of the current policies of the State
Government vis -a-vis 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. (1) The State 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 State Government shall,-
Fiscal Policy
Strategy
Statement.
Fiscal Targets.
[Act No.34 of 2005] 7
(a) reduce revenue deficit by an amount equivalent to
atleast 0.32 percentage point of GSDP in each financial
year, beginning from the 1st day of April 2005, so as to
eliminate it by 31st March 2009 and generate revenue
surplus thereafter;
5[(b) reduce fiscal deficit by an amount equivalent to
atleast 0.25 percentage point of Gross State Domestic
Product in each financial year beginning from the 1st day of
April, 200 5, so as to bring it down to not more than 3
percent; subject to the fiscal deficit limits fixed by the
Government of India from time to time:
Provided that for the financial year ending March,
2009 the fiscal deficit shall not be more than 3.5 percent of
G.S.D.P. and for the financial year ending March, 2010 the
fiscal deficit shall not be more than 4 percent of G.S.D.P;]
(c) ensure within a period of five years, beginning
from the initial financial year on the 1st day of April 2005,
and ending on the 31st day of March 2010, that the
outstanding total liabilities do not exceed 35 per cent of the
estimated GSDP for that year;
6[(cc) ensure within the subsequent period of five
years, beginning from the financial year on the 1st day of
April, 2010, and ending on the 31st day of March, 2015, that
the total outstanding liabilities do not exceed 27.6 percent of
the GSDP, as prescribed by the Government of India in
pursuance of the recommendations of Thirteenth Finance
Commission, year wise as follows:
for the financial year 2010-11 30.3 percent of GSDP
for the financial year 2011-12 29.6 percent of GSDP
5. Amendment made to clause (b) by Act 39 of 2008 . S ubsequently
clause (b) substituted by Act No.7 of 2010.
6. Inserted by Act No.8 of 2011.
8 [Act No.34 of 2005]
for the financial year 2012-13 28.9 percent of GSDP
for the financial year 2013-14 28.2 percent of GSDP
for the financial year 2014-15 27.6 percent of GSDP;]
(d) limit the amount of annual incremental risk
weighted guarantees to 90 percent of the TRR in the year
preceding the current year:
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
State Government arising out of internal disturbance or
natural calamity or such other exceptional grounds as the
State Government may specify:
Provided further that a statement in re spect of the
ground or grounds specified in the first proviso shall be
placed before the House or Houses of the Legislature, as
soon as may be, after such deficit amount exceeds the
aforesaid targets.
10. (1) The State Government shall take suitable measures
to ensure greater transparency in its fiscal operations in the
public interest and minimise 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 State Government shall, at
the time of presentation of the budget, make disclosures on
the following, along with detailed information in such forms
as may be prescribed,-
(a) the significant changes in the accounting
standard, policies and practices affecting or likely to affect
the computation of fiscal indicators;
Measures for
Fiscal
Transparency.
[Act No.34 of 2005] 9
(b) details of borrowings by way of Ways and Means
Advances/Overdraft availed of from the Reserve Bank of
India.
(3) Whenever the State 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. (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 before the
House or Hou ses 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 the rules made
under this Act, the State Gove rnment shall take appropriate
measures for increasing revenue and/or for reducing the
expenditure, including curtailment of the sums authorised 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 Consolidated Fund of the
State under clause (3) of article 202 of the Constitution 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 this Act, no deviation
in meeting the obligations cast on the State Government
under this Act shall be permissible without approval of
Legislature;
Measures to
enforce
compliance.
10 [Act No.34 of 2005]
(b) Where owing to unforeseen circumstances, any
deviation is made in meeting the obligations cast on the
State Government under this Act, the Minister of Finance
shall make a statement in the House or Houses of
Legislature explaining,-
(i) any deviation in meeting the obligations cast on
the State Government under this Act;
(ii) whether such deviation is substantial and relates
to the actual or the potential budgetary outcomes; and
(iii) the remedial measures the State 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 increased expenditure or loss of
revenue, shall be accompanied by a statement of remedial
measures, proposed to neutralise such i ncrease or loss and
such statement shall be placed before the House/Houses of
Legislature.
(5) The State Government may set up an agency
independent of the State Government to review periodically
the compliance of the provisions of this Act and table suc h
reviews in the House or Houses of the State Legislature.
7[(6-A) The total value of capital works sanctioned,
other than Stage -1 sanctions, by any Department in a
financial year under the appropriate Head of Account shall
be such that,-
(i) the cumulative value of sanctioned works including
spill over commitments shall not exceed three times of
7. Added by Act No.3 of 2014.
[Act No.34 of 2005] 11
budget estimate for the corresponding Hea d of Account for
that year; and
(ii) the total value of works scheduled to be executed
as per contractua l requirements; in that year including spill
over commitments shall not exceed one and a half times the
budget estimate for the corresponding Head of Account for
that year.
(6-B) The Minister of Finance shall review, every
quarter, and shall,-
(i) place the matter before the Council of Ministers to
evolve a mechanism to bring the sanctions within limits,
where the works sanctioned are not in accordance with the
provisions under sub-section (6-A) for any quarter;
(ii) place the matter before the Legi slature, where the
works sanctioned are not in accordance with the provisions
under sub-section (6-A) for two successive quarters; and
(iii) ensure that the works sanctioned are brought in
accordance with sub-section (6-A) within two financial years,
where the works sanctioned are not in accordance with the
said provisions as on the date of commencement of the said
provisions under sub-section (6-A).
(6-C) If for any special reasons, as may be prescribed,
works are sanctioned exceeding the limits in a financial
year, the Minister of Finance shall during the year place
before the Legislature the reasons therefor and the schedule
for restoring it to the prescribed limits.]
12. No suit, prosecution or other legal proceedings shall lie
against the Government or any officer, authority or person
empowered to exercise the powers and perform the
functions by or under this Act for anything which is in good
Protection of
action taken in
good faith.
12 [Act No.34 of 2005]
faith done or intended to be done under this Act or the rules
or orders made thereunder.
13. Save as otherwise provided , the provisions of this Act
shall be in addition to and not in derogation of any other law
for the time being in force, except to the extent the
provisions of other laws are inconsistent with any provisions
of this Act.
14. If any doubt or difficulty arises in giving effect to the
provisions of this Act, the Government may, by order make
such provisions or give such directions not inconsistent with
the provisions of this Act as may appear to i t be necessary
or expedient for removal of doubt or difficulty:
Provided that no order shall be made under this
section after the expiry of two years from the
commencement of this Act.
15. (1) The State 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 form of the Macroeconomic Frame work
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;
Application of
other laws not
barred.
Power to remove
difficulties.
Power to Make
Rules.
[Act No.34 of 2005] 13
(d) the forms for disclosure u nder sub-section (2) of
section 10;
(e) measures to enforce compliance;
(f) the manner of review of compliance of the
provisions of this Act by the independent agency under
section 11; and
(g) any other matter which is required to be, or may
be, prescribed.
(3) Every rule made under this Act shall be laid, as
soon as may be after it is made, before the House or
Houses of the Legislature, while it is in session for a total
period of thirty days wh ich may be comprised in one
session or in two or more successive session s, and if,
before the expiry of the session immediately following the
session or the successive sessions aforesaid, the
House/Houses agree in making any modification in the rule
or the House/Houses 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.
16. The Andhra Pradesh Fiscal Responsibility and Budget
Management Ordinance, 2005 is hereby repealed.
* * *
Repeal of
Ordinance No.9 of
2005.