UTTAR PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT ACT, 2004 (U.P. Act No. 5 of 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 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 and for matters connected therewith or incidental thereto. It is hereby enacted in the Fifty-fifth Year of the Republic of India as follows: 1. Short title and commencement. - (1) This Act may be called the Uttar 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.] 2. Definitions. - 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 proceeding the year for which budget and Medium Term Fiscal Restructuring Policy are being presented; (c) "fiscal dificit" means the excess of (i) total disbursements 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 (ii) total expenditure from 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 net 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 domestic product or any other rations, 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 dificit" 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. 3. Medium Term Fiscal Restructuring Policy to be laid before the Legislature. - (1) The State Government shall in each financial year 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 subsection (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 performance on the basis of the prescribed fiscal indicators vis-a-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 economic 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 ensuing financial year; (e) the policies of the State Government for the ensuing financial year relating to taxation, expenditure, borrowings and other liabilities, lending and investments, pricing of administered goods and services, guarantees and activities of Public Sector Undertakings which have potential budgetary implications; and the key fiscal measures and targets pertaining to each of these; (f) an evaluation as to how current policies of the State 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 form as may be prescribed. [(6) The State Government shall endeavour to make the Medium Term Fiscal Restructuring Policy more comprehensive giving details of all significant items of receipt and expenditure.] 4. Fiscal Management Principles. - (1) The State Government shall be guided by the following fiscal management principles - (a) to maintain Government debt at prudent levels; (b) to manage guarantees and other contingent liabilities prudently, with particular reference to the quality and level of such liabilities; [(c) maintain fiscal deficit at not more than five per cent of the estimated Gross State Domestic Product in the fiscal year 2020-2021.] (d) to ensure that borrowings are used on development activities, which are evaluated to become self-sustained, and creation or augmentation 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 lax 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 expenditure 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; (n) to minimize fiscal risks associated with running of public sector undertakings and utilities 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 without prejudice to the generality of the foregoing provisions, the State Government shall - [(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); [(c)(i) maintain fiscal deficit at not more than three percent of the estimated Gross State Domestic Product in each of the Years 2015-2016, 2016-2017, 2017-2018, 2018-2019, and 2019-2020: [Provided also that the ceiling of fiscal deficit in the fiscal year 2019-2020 shall be enhanced by an additional borrowing of Rupees 10,570 crore, allowed by the Government of India, over and above the ceiling of 3 percent of the estimated Gross State Domestic Product for the fiscal year 2019-2020.] Provided that, if debt to GSDP ratio in the preceding year is not more than 25 percent and revenue deficit in the current year as well as in the preceding year is nil, the limit of fiscal deficit to GSDP ratio may be increased to 3.25 percent: Provided further that if the interest payments in the preceding year are not more than 10 percent of the revenue receipt payments in the preceding year are not more than 10 percent of the revenue receipt and revenue deficit in the current year as well as in the preceding year is nil, the limit of fiscal deficit to GSDP ratio can be increased to 3.25 percent: Provided also that if the conditions mentioned in both the foregoing provisos are fulfilled, the limit of fiscal deficit to GSDP ratio my be increased to 3.50 percent; (ii) If, in the period 2015-2016 to 2018-2019, in a given year the State Government does not exhaust the borrowing ceiling of three percent of GSDP for that year, then the State Government will have an option of availing the unutilised borrowing amount calculated in rupees only in the following year;] [(d) reduce fiscal deficit as percentage of Gross State Domestic Product in each of the financial years referred to in clause (c) in a manner consistent with the goal set out in that clause.] (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; [(f) ensure that the total debt stock is maintained at not more than 31 percent, 31 percent, 30.50 percent, 30.50 percent and 30 percent of the estimated Gross State Domestic Product at the end of the Years 2015-2016, 2016-2017, 2017-2018, 2018-2019 and 2019-2020 respectively;] [Provided that the total debt stock at the end of the fiscal year 2019-2020 shall be enhanced by an additional borrowing of Rupees 10,570 crore allowed by the Government of India, over and above 30 per cent of the estimated Gross State Domestic Product for the fiscal year 2019-2020.] [(g) provide for at least 70 percent of budget provision for capital works for the on going capital works and not more than 30 percent for the new capital works in the annual budget provision of various departments.] 5. Measures for Fiscal Transparency. - (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 provisions, 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 guarantees; 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 contracts; 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. 6. Measures to Enforce Compliance. - (1) The Annual budget, and policies announced at the time of the budget shall be consistent with the objectives and targets specified in the Medium Term Fiscal Restructuring 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 targets, and place before both the Houses of Legislature the outcome of such reviews. The review report shall be in such form 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 decision 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 curtailing 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 Government will give priority to protecting certain expenditure defined in the Medium Term Fiscal Restructuring Policy as "High Priority Development Expenditure" (including, inter alia) from curtailment or may impose a recede or partial curtailment. (5) Whenever 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. [(6) The Government shall appoint an independent agency to review the status of financial position of the Government with special reference to the compliance of the provision of this Act. The periodicity of such review shall be such as may be prescribed.] 7. Power to make rules. - (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 Policy referred to in section 3; (c) any other matter which is required to be, or may be prescribed. 8. Protection of action taken in good faith. - 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. 9. Application of other laws not barred. - The provision 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. 10. Power to remove difficulties. - (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 inconsistent with the provisions of this Act as it may 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. 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 this section shall be laid as soon as may be after it is made, before each House of the State Legislature. |
