The Hindu Business Line : Bill to ensure fiscal prudence tabled in AP

The Commission had recommended that the debt relief shall be available only to those States which enact a fiscal responsibility legislation prescribing specific annual targets.

Hyderabad , Oct. 3

THE State Government has presented a Bill that provides for a mechanism to ensure prudence in fiscal and debt management.

This is part of the effort to streamline finances through a medium-term fiscal framework and avail of certain financial benefits from the Central Government by doing so.

With its passage, the State Government would be entitled to get the write-off of current year's debt and interest relief of Rs 1,378 crore.

The Finance Minister, Mr K. Rosaiah, today introduced Bill in the State Legislative Assembly that will replace the existing Ordinance promulgated in June.

The Andhra Pradesh Fiscal Responsibility and Budget Management Bill, 2005, is a follow up of the Twelfth Finance Commission proposal that helps write off Central loans and helps in debt restructure for the States, which adhere to a defined path of transparency in fiscal discipline.

The Commission had recommended that the debt relief shall be available only to those States which enact a fiscal responsibility legislation prescribing specific annual targets. This would be based on a road map for eliminating the revenue deficit by 2008-09 and reducing the fiscal deficit founded on a path for reduction of borrowings and guarantees.

The Reserve Bank of India had constituted a task force consisting of State Finance Secretaries to draft a model fiscal responsibility legislation. This Bill is aimed to address the overall financial framework.

The RBI and the Central Government have approved this legislation.

According to statement of objects and reasons, the Bill seeks to eliminate revenue deficit and build up adequate revenue surplus by 2008-09 and pursue necessary policies to raise non-tax revenue; to ensure cost recovery and equity; and to lay down the principles governing capital expenditure which should lead to growth, equity and welfare.

As a part of better fiscal management, the Finance Minister will be responsible for placing before the legislature, the quarterly review of receipts and expenditure in relation to the budget estimates. Appropriate measures would be initiated to increase the revenue or for reducing the expenditure whenever there is a shortfall or excess expenditure in the year compared to the prescribed targets mentioned in the Ordinance.

Transparency in implementing policies is amongst top of the agenda to achieve better results.

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