LexThe UTTAR PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2004
Uttar Pradesh · state statute
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THE UTTAR PRADESH FISCAL RESPONSIBILITY AND
BUDGET MANAGEMENT ACT, 20041
(U. P. ACT No. 5 OF 2004)
Amended by
U. P. Act No. 15 of 2010
U. P. Act No. 05 of 2011
U. P. Act No. 17 of 2011
U. P. Act No. 08 of 2016
U.P. Act No. 12 of 2020
U.P. Act No. 22 of 2020
U.P. Act No. 23 of 2021
U.P. Act No. 12 of 2025
U.P. Act No. 18 of 2026
[As passed by the Uttar Pradesh Legislature , assented
to by the Governor on February 26, 2004 and published in
the U.P. Gazette extraordinary on February 27, 2004]
AN
ACT
to provide for the responsibility of the State Government
to ensure fiscal stability and sustainability , and to enhance the
scope for improving social and physical infrastructure and
human development by achieving sufficient revenue surplus,
reducing fiscal deficit and removing impedi ments to the effective
conduct of fiscal policy and prudent debt management through
limits on State Government borrowings, government guarantees,
debt and deficits, greater transparency in fiscal operations of
the state Government and use of a medium-term fiscal framework
and for matters connected therewith or incidental thereto.
IT IS HEREBY enacted in the Fifty -fifth Year of the Republic of
India as follows :–
Short title and
commencement
1. (1) This Act may be called th e U ttar Pradesh Fiscal
Responsibility and Budget Management Act, 2004.
(2) It shall come into force on such date as the State
Government may by notification, appoint.
Definitions 2. In this Act, unless the context otherwise requires, —
(a) ―annual budget‖ means the annual financial statement laid
before both Houses of State Legislature under Article 202 of the
Constitution ;
(b) ―current year‖ means the year preceding the year for which
budget and Medium Term Fiscal Restructuring Policy are being
presented ;
(c) ―fiscal deficit‖ means the excess of —
(i) total disbursement 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
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1. For S.O.R. see at the end of the Act.
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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(ii) total expenditure fro m 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, no t of repayment of
debt, of the State Government during the financial year ;
(d) ―Fiscal Indicators‖ means the measures such as numerical
ceilings and proportions to gross state dome stic 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.
Medium
Term Fiscal
Restructuring
Policy to be
laid before
the
Legislature
3. (1) The State Government shall in each financial yea r lay
before both Houses of the Legislature a Medium Term Fiscal
Restructuring Policy along with the annual budget.
(2) The Medium Term Fiscal Restructuring Policy shall set forth
a five -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 Restructuring
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 Restructuring Policy shall, inter-alia,
contain —
(a) the medium term fiscal objectives of the State Government ;
(b) an evaluation of performa nce on the basis of the prescribed
fiscal indicators vis-a-s-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 econ omic 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 ensuring financial year ;
(e) the policies of the State Gover nment for the ensuing financial
year relating to taxation, expenditure, borrowings and other liabilities,
lending and investments, pricing of admi nistered goods and services,
guarantees and activities of Public Sector Undertakings which have
potential budg etary implications; and the key fiscal measures and
targets pertaining to each of these ;
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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(f) an evaluation as to how current policies of the Sta te
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 Restructuring Policy.
(5) The medium Term Fiscal Restructuring policy shall be in
such from as may be prescribed.
1[(6) The State Government shall endeavor to make the Medium
Term Fiscal Restructuring Policy more comprehensive giving details of
all significant items of receipts and expenditure.]
Fiscal
Management
Principles
4. (1) The State Government sh all be guided by the following
fiscal management principles —
(a) to maintain Government debt at pedant 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 decision 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 augm entation 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 minimizing
special incentives, concessions and exemptions ;
(g) to pursue tax policies 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 non-tax revenue 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
properly 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 ;
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1. Ins. by sec. 2 of U. P. Act no. 5 of 2011.
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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(n) to minimize fiscal risks associated with running of public
sector undertakings and utilizes 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 build up adequate revenue surplus.
(3) In particular, and wi thout prejudice to the generality of the
foregoing provisions, the State Government shall —
1[(a) reduce revenue deficit to nil by the end of the fiscal year
2011-12, and maintain revenue balance or attain a surplus thereafter.]
(b) reduce revenue 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 (a) ;
2[(c) maintain fiscal deficit at not more than three percent of the
estimated Gross State Domestic Product in each of the Years 2026 -
2027, 2027-2028, 2028-2029, 2029-2030 and 2030-2031;]
3[(d) reduce fiscal deficit as percentage of Gross State Domestic
Product in each of the financial years refe rred to in clause (c) in a
manner consistent with the goal set out in that clause. ] 3
(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 ;
4[(f) ensure that the total debt stock is maintained at not more
than 30 percent of the estimated Gross State Domestic Product at the
end of the Y ears 2026 -2027, 2027-2028, 2028 -2029, 2029-2030 and
2030-2031 respectively; ]
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1. Subs. by sec. 2(a) of U. P. Act no. 5 of 2011.
2. Subs. by sec. 2(a) of U. P. Act no. 18 of 2026.
3. Subs. by sec. 2 of U. P. Act no. 15 of 2010.
4. Subs. by sec. 2(b) of U. P. Act no. 18 of 2026.
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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1[(g) Provide for at least 70 percent of budget provision for
capital works for the ongoing capital works and not more than 30
percent for the new capital works in the annual budget pr ovision of
various departments.]
Provided that revenue deficit and fiscal deficit may exceed the
limits specified under this sub -section due to ground of unforeseen
demands on the finance of the State Government due to national
security or natur al 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 both the Houses of Legislature, as
soon as possible, after it becomes likely that such deficit amount may
exceed the aforesaid limits, with an accompanying report stating the
likely extent of excess, and reasons therefor.
Measures for
Fiscal
Transparency
5. (1) The State Government shall take suitable measures to
ensure greater transparency in its fiscal operations in public interest
and minimize as far as practicable, secrecy in the preparation of the
annual budget.
(2) In particular and without prejudice to the generality of the
foregoing provision, the State Government shall, at the time of
presentation of the annual budget, disclose in a statement in the form
as may be prescribed, —
(a) the significant changes in the accounting standards, policies
and practices affecting 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 guaran tees;
the actual liabilities arising out of borrowings by Public Sector
Undertaking and Special Purpose Vehicles and other equivalent
instruments where liability for repayment is on the State Government
allocations and commitments made by the State Government having
potential budgetary implications, 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 c ontracts ; and subsidy payments and
the 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.
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1 Ins. by sec. 2(c) of U. P. Act no. 8 of 2016.
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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Measures to
enforce
compliance
6. (1) The Annual budget and policies announced at the time of
the budget shall consistent with the objectives and targets specified in
the Medium Term Fiscal Restructur ing Policy for the coming and
future years.
(2) The Minister incharge of the Department of Finance shall
review, every half year, the trend in receipts and expenditure in
relation to the budget , remedial measures to be taken to achieve the
budget targe ts, and place before both the Houses of Legislature the
outcome if such reviews. The review report shall be in such from as
may be prescribed.
(3) The review report 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 dec ision 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 curt ailing 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 Governm ent will give priority to protecting certain expenditure
defined in the Medium Term Fiscal Restructuring P olicy as ―High
Priority Development Expenditure‖ (including, inter alia. ) from
curtailment or may impose a recede or partial curtailment.
(5) Whene ver one or more supplementary estimates are
presented to the House of Legislature, 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 of the supplementary estimates in relation to
the budget targets of the current year and the Medium Term Fiscal
Restructuring Policy objectives and targets for the future year.
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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1[(6) The Government shall appoint an independ ent agency to
review the status of financial position of the Government with special
reference to the compliance of the provisions of this Act. The
periodicity of such review shall be such as may be prescribed. ]
Power to
make rules
7. (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 Restructuring Po licy
referred to in section 3 ;
(c) any other matter which is required to be, or may be
prescribed.
Protection of
action taken
in good faith
8. No suit for prosecution or other legal proceedings shall lie
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.
Application
of other laws
not barred
9. The provisions of this Act shall be in addition to, and not in
derogation of the pr ovisions of any other law for the time being in
force.
Power to
remove
difficulties
10. (1) If any difficulty arises in giving effect to the provisions
of this Act, the State Government may, by order published in the
Gazette make such provisions not inc onsistent with the provisions of
this Act as it may have been 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 thi s section shall be laid as soon as
may be after it is made, before each House of the State Legislature.
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1. Ins. by sec. 4 of U. P. Act no. 5 of 2011.
[The Uttar Pradesh Fiscal Responsibility and Budget Management Act, 2004]
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STATEMENT OF OBJECTS AND REASONS
With a view to provide for the responsibility of the State
Government to ensure fiscal stability and sustainability and to
enhance the scope for improving social and physical infrastructure and
human development by achieving sufficient revenue surplus, reducing
fiscal deficit and removing impediments to the effective conduct of
fiscal policy and prudent debt management through limits on State
Government borrowings, government guarantees, debt and deficits,
greater transparency in fiscal operations of the state Government and
use of a medium term fiscal framework, it was considered necessary to
enact a law.
The Fiscal Responsibility Bill, among other things, provides for
the following : —
(i) requiring the State Government to lay in each financial year
before both Houses of the State Legislature a Medium Term Fiscal
Restructuring Policy along with the annual budget which will set forth
five year rolling targets of prescribed fiscal indicators.
(ii) specifying fiscal management principles to guide the State
Government.
(iii) requiring the State Government to take appropriate
measures to eliminate revenue deficit and containing the fiscal def icit
as percentage of GSDP by 31 st March, 2009 within the prescribed
limits.
(iv) requiring the State Government to take suitable measures
to ensure transparency in fiscal operations and to minimize as far as
practicable, secrecy in the preparation of the annual budget.
(v) to require that the annual budget and the policies
announced at the time of budget shall be consistent with the objectives
and targets specified in the Medium Term Fiscal Restructuring Policy
for the coming and future years.
(vi) half-yearly reviews of the trends in receipts and expenditure
in relation to the budget by the Finance Minister and placing the
outcome of such review before both the Houses of the State
Legislature.
(vii) requiring the Finance Minister to make state ment in both
the Houses of the State Legislature in respect of any deviation in
meeting the obligations cast on the State Government under the
Legislation.
(viii) relaxation from deficit reduction targets to deal with
unforeseen demands on account of na tional security or unprecedented
natural calamities.
The Uttar Pradesh Fiscal Responsibilities and Budget
Management Bill, 2004 is introduced accordingly.