The West Bengal Ceiling On Government Guarantees Act, 2001

GOVERNMENT OF WEST BENGAL 
LAW DEPARTMENT 
Legislative 
West Bengal Act XVII of 2001' 
THE WEST BENGAL CEILING ON GOVERNMENT 
GUARANTEES ACT, 2001. 
[Passed by the West Bengal Legislature.] 
[Assent of the Governor was first published in the Calcutta Gazette, 
Extraordinary, of the 31st July, 2001.] 
Short title 
and 
commence-
ment. 
Definitions. 
An Act to provide for ceiling on Government Guarantees and other 
matters connected therewith or incidental thereto. 
WHEREAS it is expedient to provide for ceiling on Government 
Guarantees issued on behalf of the Government departments, public sector 
undertakings, local authorities, statutory boards, corporations and co-
operative institutions and for promoting fiscal discipline of the State; 
It is hereby enacted in the Fifty-second Year of the Republic of India, 
by the Legislature of West Bengal, as follows:- 
1. (1) This Act may be called the West Bengal Ceiling on Government 
Guarantees Act, 2001. 
(2) It shall come into '-force on such date as the State Government 
may, by notification, appoint. 
2. In this Act, unless the context otherwise requires,— 
(a) "Government" means the Government of West Bengal; 
(b) "Government Guarantee" includes the guarantee given by 
the State Government on behalf of the Government 
departments, public sector undertakings, local authorities, 
statutory boards, corporations and co-operative institutions; 
(c) "notification" means a notification published in the Official 
Gazette; 
'For proceedings of the West Bengal Legislative Assembly, see the proceedings of the 
meeting of that Assembly held on the 30th July, 2001. 
-This Act came into force w.e.f. 1.8.2001 vide the Finance (Taxation) Department ' 
Notification No. 2605-F.T., dt. 1.8.2001, published in the Kolkata Gazette. Extraordinary. 
Part I, dt. 1.8.2001. 
195 
The West Bengal Ceiling on Government Guarantees Act, 2001. 
[West Ben. Act 
(Sections 3-6.) 
(d) "Performance Guarantee" includes the documents such as 
letters of comfort, paper purchase agreement, state support 
agreement, concession agreement for infrastructure project 
and other agreements, guaranteed in certain performance on 
behalf of Government departments, public sector under-
takings, local authorities, statutory boards, corporations and 
co-operative institutions. 
Ceiling on 
Government 
Guarantees. 
Prohibition. 
Guarantee 
commission. 
Performance 
Guarantee. 
3. The total outstanding Government Guarantees as on the first day 
of April of any year shall not exceed ninety per cent of the State revenue 
receipts of the second preceding year of such year as they stood in the 
books of the Accountant General of West Bengal: 
Provided that the ceiling on the Government Guarantee shall not 
apply for any loan raised by the West Bengal Infrastructure Development 
Finance Corporation Limited under the guarantee given by the 
Government and fully availed of by the Government itself for funding 
different infrastructure projects and for repayment of which there is 
specific provision in the budget of the State. 
4. Notwithstanding anything contained in any other law for the time 
being in force,— 
(a) no Government Guarantee shall be given in respect of a loan 
of any private individual, institution or company; 
(b) no Government Guarantee shall be extended to the co-
operative institutions unless the share capital contribution 
from the non-Government sources is not less than ten per cent 
of the total equity proposed. 
5. (1) The Government shall charge a minimum of one per cent as 
guarantee commission which shall not be waived under any circumstances. 
(2) Depending on the default risk of the project, the Government may, 
by notification, specify commission at an enhanced rate. 
Explanation.—For the purposes of this section, 'default risk' means 
the probability of default by the borroweron whose behalf the Government 
Guarantee is given, depending on the amount borrowed, the type of 
industry and the economic situations. 
6. (1) In the interest of development of infrastructure project the 
Government may continue to give Performance Guarantee to all such 
sectors. 
196 
The West Bengal Ceiling on Government Guarantees Act, 2001. 
XVII of 2001.] 
(Section 6.) 
(2) The Government shall lay before the Legislative Assembly of the 
State a comprehensive report on the liabilities (in rupees) that the State 
may incur in future, if the State fails to meet the contractual obligation 
stated in the Performance Guarantee. 
(3) The report referred to in sub-section (2) shall be laid within six 
months of the date of giving Performance Guarantee: 
Provided that if the Legislative Assembly of the State is not in session 
or is not sitting on the date on which the said period of six months expires, 
the said period of six months shall be deemed to expire on the first day on 
which the Legislative Assembly first sits after the aforesaid date. 
Statement of Objects and Reasons on the West Bengal Ceiling on 
Government Guarantees Bill, 2001 (Bill No. 21 of 2001). 
STATEMENT OF OBJECTS AND REASONS. 
A Technical Committee of State Finance Secretaries was constituted 
by the Reserve Bank of India to examine the various aspects of Guarantees 
given by the State Governments. The said Technical Committee has 
recommended to fix limit on Government Guarantees. Hence, in order to 
implement the recommendations of the said Technical Committee, it is 
considered necessary to bring out legislation to provide for limits on 
Government Guarantees issued on behalf of the Government departments, 
public sector undertakings, local authorities, statutory boards, corporations 
and co-operative institutions for promoting fiscal discipline of the State. 
2. The Bill has been framed with the above objects in view. 
KOLKATA, 	 ASIM KUMAR DASGUPTA, 
The 26th June, 2001. 	 Member-in-charge. 
197 

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