2%4 The Arunachal Pradesh Gazette EXTRAORDINARY PUBLISHED BY AUTHORITY No. 128, Vol. XIV, Naharlagun, Monday, February 12, 2007, Magha 23, 1928 (Saka) GOVERNMENT OF ARUNACHAL PRADESH DEPARTMENT OF FINANCE ITANAGAR NOTIFICATION The 12th February, 2007 THE ARUNACHAL PRADESH FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT RULES, 2007 No. FIN/FC-1/2006.-In exercise of the powers conferred by sub-section (I) of section 7 of the Arunachal Pradesh Fiscal Responsibility and Budget Management Act, 2006 (Act No.4 of2006), the Government ofArunachal Pradesh hereby makes the following rules, namely:-
1. Short title and commencement: ( I) These rules may be called theArunachal Pradesh Fiscal Responsibility and Budget Management Rules, 2007.
(2) They shall come into force on the date of their publication in theArunachal Pradesh Gazette.
2. Definitions : In these rules, unless the context otherwise requires,
(a) "Act"means theArunachal Pradesh Fiscal Responsibility and Budget ManagementAct, 2006. (Act No. 4 of 2006).
(b) "Contingent liabilities" means guarantees given by the State Government for borrowings by Public Sector Undertakings and Special Purpose Vehicles and other equivalent instruments for which the State Govern ment may be called upon to make payment in case of default by the borrowing organizations-,
(c) "MTFP" means theMediumTerm Fiscal Plan;
(d) "Year"means financial year ;
(e) "Next year" means the year for which the budget is being presented;
(t) "Off-budget borrowings" means borrowings by Public Sector Undertakings and Special Purpose Vehicles and other equivalent instruments where liability for repayment is on the StateGovernment;
(g) "Section" means a section of theAct;
(h) "Prescribed" means prescribed by rules made under theAct.
(i) Words and expressions used herein but not defined in the rules shall have the same meaning respectively assigned to them in the Act.
3. Annual Targets of Maintenance of Revenue Surplus and Reduction of Fiscal Deficit: In accordance with the objective ofmaintenance ofrevenue surplus and reduction of fiscal deficit of the StateGovernment, as laid down in sub-section (3) of section 4 of theArunachal Pradesh Fiscal Responsibility and Budget Management(FRBM) Act, 2006 (ActNo. 4 of2006), the StateGovernment shall strive :-
(a) to maintain at least the level of revenue surplus in the base year (average of 2001-02 to 2003-04), in the subsequent years, beginning with the financial year 2005-06 and ending with 2008-09 and adhere to it thereafter.
(b) to reduce every year the fiscal deficit by aminimum of0.3 per cent of theGross State Domestic Product by the end of each financial year. beginning with the financial year 2005-06 so as to reduce the same to 3% or below by 2008-09 and adhere to it thereafter.
4. Fiscal Indicators: (1) In theMedium Term Fiscal Plan as required under sub-section(2) of section 3 of theAct, four year rolling target in respect of the following fiscal indicators shall be as given in Form F-1, namely ;
(a) revenue surplus/deficit as percentage of GSDP;
(b) fiscal deficit as a percentage ofGross State Domestic Product (GSDP);
(c) tax revenue as a percentage ofGSDP; and
(d) total outstanding liabilities of the State Government as a percentage of GSDP.
(2) The Medium Term Fiscal Plan shall also explain the assumptions underlying the above mentioned targets for fiscal indicators and an assessment of sustainability relating to the items indicated in sub-section (3) of section 3 of theAct. 2 TheArunachal Pradesh Extraordinary Gazette, February 12, 2007
5. Form andcontents of theMedium Term Fiscal Plan : TheMediumTenn Fiscal Plan (MTFP) shall be in adescriptive form including but not restricted to the following matters, namely :
(a) Fiscal objectives and strategies to achieve shall be in Form F-2;
(b) Review of fiscal performance of the previous year vis-a-vis targets with reference to fiscal indicators prescribed in rule 4 ;
(c) Review ofthe likely fiscal performance of the current year as per the revised estimates vis-a-vis targets with reference to fiscal indicators specified in rule 4 ;
( d) Review ofmacro-economic outlook and forecast ofGross State Domestic Product growth rate for each year of the 4 year period.
(e) A table containing absolute figures pertaining to the year before previous year (accounts), the previous year (budget estimates and accounts) and the current year (budget estimates and revised estimates), the next year (budget estimates) and projection for two subsequent years and a corresponding tablewith figures as percentages ofGross StateDomesticProduct (GSDP) for the following items: (I) Revenue receipts with break-up of;
(i) State's Own Tax Revenues ;
(ii) Non Tax revenues ; and
(iii) Resources from the Centre ;
(2) Revenue Expenditure with break-up of;
(i) Interest ;
(ii) Salaries ;
(iii) Pensions ;
(iv) Subsidies (Power, Food, Transport, Housing, Industry and others) ;
(v) O&M;
(vi) Devolution to Urban Local Bodies ;
(vii) Administrative Expenditure; and
(viii) Other Revenue Expenditure;
(3) Revenue Surplus/Deficit,
(4) Capital Receipt;
(5) Expenditureon Capital formation;
(6) Fiscal Deficit;
(7) Total Debt stock ;
(8) Debt Services ;
(9) Off-budget Borrowings;
(10) Power Sector subsidy requirement ; and (I I) Guarantee Stock;
(f) thepolicies ofthe State Government for the ensuing financial year relating to taxation, expenditure, borrowings (including borrowings by Public Sector Undertakings and Special Purpose Vehicles and other equivalent instruments where liability for repayment is on the StateGovernment, with ceiling fixed for each agency) and other liabilities, lending and investments, pricing of administered goods and services and description of other activities, such as guarantees and activities of the Public Sector Undertakings which have potential budgetary implications; and the key fiscal measures and targets pertaining to each of these;
(g) an evaluation as to how the 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 theMediumTerm Fiscal Plan.
6. Measures for Fiscal Transparency: The Statement referred to in sub-section (2) of section 5 of theAct would be presented to the Legislature simultaneously with the Budget and will be called a "Budget Overview" which would include, inter-alia, the following statements, namely :-
(a) a statement of select indicators offiscal situation in Form D-I;
(b) a statement on StateGovernment liabilities in Form D-2;
(c) a statement on guarantees given by the Government in Form D-3 ;
(d) a statement of details of number of employees in Government, public sector and aided institutions and related salaries ;
7. Half-yearly Review: The half yearly Review Report as prescribed in sub-section (2) of section 6 will include the following, namely : -
(a) A table pertaining to the half year in MTFP format as specified in clause (e) of rule 5;
(b) Comparison ofperformance in the previous years to the extent dataavailability for thecorresponding period as percentage of the year's budget,
(c) Projections of the prescribed fiscal indicators for the whole year if the present trend continues;
(d) Wherever there are likely shortfalls in revenue and excess in expenditure, the causes of the same and action being contemplated to offset the impact of the same through specific strategies.
8. Provision during Natural Calamities:- In caseofnatural calamities, as provided in sub-section (3) ofsection 4 of the Arunachal Pradesh Fiscal Responsibility and Budget ManagementAct, 2006 (Act No. 4 of2006), the fiscal cost of the calamities shall be estimated with reference to :- TheArunachal Pradesh Extraordinary Gazette, February 12, 2007 3
(a) additional expenditure due to relief and rehabilitation work in excess of the budgetary allocations, and net of any reallocations from the budget ;
(b) shortfall in revenue due to depressed economic conditions directly attributable to such calamities;
(c) Reduction in Gross State Domestic Product which may be attributed to the calamities. Accordingly, fiscal deficit can be permitted to exceed and revenue surplus can be permitted to decrease the figures provided for in theMTFP only to the extent indicated above.
9. Supplementary Estimates : Whenever a SupplementaryEstimate is presented to theLegislature, it shall be accompa nied by a Statement which will indicate,
(a) for each additional commitment, the fiscal impact of the commitment for that year and for the subsequent 3 years, if any; and
(b) Offsetting policy decision taken by theGovernment to ensure that the fiscal impact for each of the4years is nullified. Kewal K. Sharma, Development Commissioner (Finance) to the Government ofArunachal Pradesh, Itanagar. FORMF-I (See rule-4) MEDIUM TERMFISCAL PLAN A. Fiscal Indicators - Rolling Targets Current Year CurrentYear Ensuing Year Target for next (Y-1) Budget (Y-1) Revised (Y)Budget two years Estimates (BE) Estimates (RE) Estimates (BE) Y+l I Y+2 I. Revenue Surplus/Deficit as percentage ofGSDP.
2. Fiscal Deficit as percentage ofGSDP
3. Tax Revenue as percentage ofGSDP
4. Total outstanding Liabilities as percentage ofGSDP B. Assumptions underlying the fiscal Indicators: I. Revenue receipts
(a) Tax revenue- Sectoral and GSDPgrowth rates
(b) Non-tax revenue- Policy stance
(c) Devolution to Local Bodies
(d) Share of own tax revenue to total tax revenue
(e) Share of own non-tax revenue to total tax revenue
2. Capital receipts - Debt stock, repayment, fresh loans and policy stance
(a) Loans and advances from the Centre
(b) Recovery of loans and advances
(c) Borrowings from financial institutions
(d) Other receipts (net) - small savings, provident funds, etc.
(e) Outstanding Liabilities- Internal Debt and Other Liabilities
3. Total Expenditure- Policy Stance
(a) Revenue account
(i) Interest payments
(a) on borrowings during the year (aggregate and category-wise);
(b) on outstanding liabilities- (aggregate and category-wise)
(ii) Major subsidies
(iii) Salaries
(iv) Pensions
(v) Others. 4 TheArunachal Pradesh Extraordinary Gazette, February 12, 2007
(b) Capital account :
(i) Loans and advances
(ii) Capital outlay
4. GSDPGrowth. C. Assessment ofsustainability relating to:
(a) The balance between receipts and expenditure in general and revenue receiptsand revenue expenditure in particular : TheMediumTerm Fiscal Planmay specify thetax-GSDPratio, own tax--GSDPratio for the current year and subsequent two years with an assessment of the changes required for achieving it. It may discuss the non-tax revenues and the policies concerning the same. Expenditure on revenue account, both plan and non-plan may also be discussed with particular emphasis on the measures proposed to meet the overall objectives. It may discuss policies to contain expenditure on salaries, pension, subsidies and interest payments. An assessment ofthe capital receipts shall bemade, including the borrowings and other liabilities, as per policies spelt out. The statement shall also give projections for GSDP and discuss it on the basis of assumptions underlying the indicators in achieving the sustainability objective.
(b) The use ofcapital receipts includingmarket borrowings for generatingproductive assets: TheMedium Term Fiscal Plan may specify the proposed use of capital receipts for generating productive assets in different categories. It may also spell out the proposed changes among these categories and discuss them in terms of the overall policy of the Government.
(c) The estimated yearly pension liabilities worked out on actuarial basis for thenextten years: In case it is not possible to calculate the pension liabilities on actuarial basis during the period of first three years after 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 (i.e. average rate of growth of actual pension payments during the last three years for which data are available). FORMF-2 [See rule 5(a)] FISCAL OBJECTIVES AND STRATEGY STATEMENT A. FISCAL POLICY OVERVIEW: [This paragraph will present an overview of the fiscal policy currently in vogue.] B. FISCAL POLICY FOR THE ENSUING YEAR: [This paragraph shall have five sub-paragraphs dealing with]:
(1) Tax policy : In the sub-paragraph on tax policy, major changes proposed to be introduced in taxes in the ensuing financial year will be presented. It shall contain anassessment of exemption limits and how far it relates to per capita income. principles regarding tax exemptions and target group for exemptions.
(2) Expenditure Policy: Under expenditure policy, major changes proposed in the allocation ofexpenditure shall be indicated. It shall also contain an assessment of principles regarding the benefits and target group of beneficiaries.
(3) GovernmentBorrowings, Lending and Investments: In this sub-paragraph on Government borrowings, the policy relating to internal debt, Government lending, investments and other activities; including principles regarding average maturity structure, bunching of repayments, etc., shall be indicated.
(4) Contingent and other Liabilities: Any change in the policy on contingent and other liabilities and in particular guarantees which have potential budgetary implications shall be indicated.
(5) Pricing ofAdministered Goods : Any change proposed in the pricing of administered products, including the progress towards market-based principles shall be spelt out.] C. STRATEGIC PRIORITIE S FOR THE ENSUING YEAR : [(I) Resource mobilization for the ensuing financial year through tax, non-tax and other receipts shall be spelt out. 2) The broad principles underlying the expenditure management during the ensuing year shall be spelt out.
(3) Priorities relating to management of public debt proposed during the ensuing year shall be indicated.] D. RATIONALEFORPOLICYCHANGES: [(D) The rationale for policy changes consistent with the Medium Term Fiscal Plan, in respect of direct and indirect taxes proposed in the ensuing Budget shall be spelt out.
(2) The rationale for major policy changes in respect of budgeted expenditure including expenditure on subsi dies shall be indicated.
(3) Rational for changes, if any, proposed in the management of the public debt shall be indicated.
(4) The need for changes, if any, proposed in respect of pricing of administered goods shall be spelt out. ] E. TARGETS FOR THE ENSUING YEAR: [At the end ofthe first six months, amid-year assessment shall bemade ofthe trends in receipts and expenditures and achievement of targets of surplus in relation to Budget Estimates. In case the total non-debt receipts are less than 40 per cent of Budget Estimates for that year; or the fiscal deficit is higher than 45 per cent of the Budget Estimates for The Arunachal Pradesh Extraordinary Gazette, February 12, 2007 5 that year ; or the revenue surplus is lesser than 45 per cent of the Budget Estimates for that year, the State Government shall take action as required under sub-sections (2) and (3) of section 6 of the Act and indicate specific measures to correct the situation in accordance with the fiscal targets as envisaged.] F. POLICY EVALUATION: [This paragraph shall contain an evaluation of the changes proposed in the fiscal policy for the ensuring year with reference to fiscal deficit reduction and objectives set out in the Medium Term Fiscal Plan.] FORMD-1 [See rule 6(a)] SELECT FISCAL INDICATORS Rs. in crore SI.No. Item I. Revenue Receipts
2. Tax Revenue (Net)
3. Non-Tax Revenue
4. Capital receipts (5+6+7)
5. Recovery of loans
6. Other Receipts
7. Borrowing and other liabilites
8. Total Receipts ( 1+4)
9. Non-Tax Expenditure
10. Revenue Account of which II. Interest payments
12. Capital Account
13. Plan Expenditure
14. Revenue Account
15. Capital Account
16. Total Expenditure (9+ 13)
17. Revenue Expenditure (IO+ 14)
18. Capital Expenditure (12+15)
19. Revenue Deficit (17-1)
20. Fiscal Deficit {16-(1+5+6)}
21. Primary Deficit (20-11) Previous year (Actual s) CurrentYear(RE) FORMD-2 [See rule 6(b)] Components of State Government Liabilities (Rs. Crore) Category Raised during Repayment/Red Outstanding Amount the Fiscal Year emption during (End-March) the Fiscal vear Previous Current Previous Current Previous Current Year Year Year Year Year Year (Actual) (RE) (Actual) (RE) (Actual) (RE) Market Borrowings Loans from Centre Special Securities issued to the NSSF Borrowings from Financial Institutions/Banks WMA/OD from RBI Small Savings, Provident Funds, etc. Reserve Deposits Other Liabilities Total 6 TheArunachal PradeshExtraordinary Gazette, February 12, 2007 FORMD-3 [See rule 6(c)] GUARANTEES GIVEN BY THE GOVERNMENT A» Category Maximum Outdstan Additions Deletions Invoked during the Outdstan- Guarantee Commi Remarks (No. of Amount ding et during other year (Rs. Crore) ding at the ssion or Fee Guarantees Guaranteed the the year than in- end of (Rs. Crore) during the beginning (Rs. Crore) voked the year year of the year during the (Rs. Crore) (Rs. Crore) (Rs. Crore) year (Rs. Crore) Discharged I Not Receivable Received Dischargec 1 2 3 4 5 6 7 8 9 10 11 Note: Reporting year refers to the second year preceding the year for which the Budget is presented. Arunachal Govt. Press4 4/2007-DIPR&P-250+Development Commr. (F in) -120-2-2007.