THE ANDHRA PRADESH FISCAL RESPONSIBILITY AND BUDGET
MANAGEMENT ACT, 2005
ACT NO. 34 OF 2005
ARRANGEMENT OF SECTIONS
SECTIONS
1. Short title and commencement
2. Definitions
3. Fiscal Management Objectives
4. Fiscal Management Principles
5. Fiscal Policy Statements to be laid before the Legislature
6. Macro-economic Framework Statement
7. Medium Term Fiscal Policy Statement
8. Fiscal Policy Strategy Statement
9. Fiscal Targets
10. Measures for Fiscal Transparency
11. Measures to enforce compliance
12. Protection of action taken in good faith
13. Application of other laws not barred
14. Power to remove difficulties
15. Power to Make Rules
16. Repeal of Ordinance No. 9 of 2005
THE ANDHRA PRADESH FISCAL RESPONSIBILITY AND BUDGET
MANAGEMENT ACT, 2005
ACT NO. 34 OF 2005
[27th October,2005]
AN ACT TO PROVIDE FOR THE RESPONSIBILITY OF THE STATE
GOVERNMENT TO ENSURE PRUDENCE IN FISCAL MANAGEMENT
AND FISCAL STABILITY BY PROGRESSIVE ELIMINATION OF
REVENUE DEFICIT, REDUCTION IN FISCAL DEFICIT, PRUDENT
DEBT MANAGEMENT CONSISTENT WITH FISCAL SUSTAINABILITY,
GREATER TRANSPARENCY IN FISCAL OPERATIONS OF THE
GOVERNMENT AND CONDUCT OF FISCAL POLICY IN A MEDIUM
TERM FRAMEWORK AND MATTERS CONNECTED THEREWITH OR
INCIDENTAL THERETO.
Be it enacted by the Legislative Assembly of the State of Andhra Pradesh
in the Fifty-sixth Year of the Republic of India as follows:
1. Short title and commencement - (1) This Act may be called the Andhra
Pradesh Fiscal Responsibility and Budget Management Act, 2005.
(2) It shall be deemed to have come into force with effect on and from the
3rd June, 2005.
2. Definitions - In this Act, unless the context otherwise requires,-
(a) "budget" means the annual financial statement laid before the
House or Houses of the State Legislature under Article 202 of the
Constitution;
(b) "current year" means the financial year preceding the ensuing
year;
(c) "ensuing year" means the financial year for which the budget is
being presented;
(d) "financial year" means the year beginning on the 1st April and
ending on 31st March next following;
(e) "GSDP" means Gross State Domestic Product at current market
prices;
(f) "fiscal deficit" is the excess of aggregate disbursements (net of
debt repayments) over revenue receipts, recovery of loans and non-
debt capital receipts;
(g) "fiscal indicators" are such indicators as may be prescribed for
evaluation of the fiscal position of the State Government;
(h) "fiscal targets" are the numerical ceilings and proportions to
total revenue receipts (TRR) or GSDP for the fiscal indicators;
(i) "prescribed" means prescribed by the rules made under this Act;
(j) "previous year" means the year preceding the current year;
(k) "revenue deficit" means the difference between revenue
expenditure and total revenue receipts (TRR);
Explanation - ‘Total revenue receipts' (TRR) includes State's own
revenue receipts (both tax and non-tax) and current transfers from
the Centre (comprising grants and State's share of Central taxes).
1[(ka) “stage-1 sanctions’ means, the administrative approval
accorded for the following items which will help in preparation of
detailed project reports,-
(i) Detailed investigation;
1 . The clause (ka) inserted by the Act No. 3 of 2014 Section 2 (w.e.f 17.02.2014)
(ii) Preparation of EIA and EMP reports, R&R plan, forest
clearance etc.,
(iii) Preparation of detailed designs/drawings;
(iv) Obtaining of necessary clearances;
(v) Acquisition of minimum lands required;
(vi) Completion of R&R and EMP etc.,;
(vii) Shifting of utilities for R&B Works;]
(l) "total liabilities" means the liabilities under the Consolidated
Fund of the State and the Public Account of the State and shall
also include borrowings by the public sector undertakings and the
special purpose vehicles and other equivalent instruments
including guarantees where the principal and/ or interest are to be
serviced out of the State budgets.
3. Fiscal Management Objectives - The State Government shall, -
(a) take appropriate measures to eliminate the revenue deficit and
thereafter build up adequate revenue surplus and contain the
fiscal deficit at a sustainable level, and utilize such surplus for
discharging the liabilities in excess of the assets or for funding
capital expenditure;
(b) pursue policies to raise non-tax revenue with due regard to cost
recovery and equity; and
(c) lay down norms for prioritisation of capital expenditure, and
pursue expenditure policies that would provide impetus for
economic growth, poverty reduction and improvement in human
welfare.
4. Fiscal Management Principles - The State Government shall be guided by
the following fiscal management principles, namely;-
(a) transparency in setting the fiscal policy objective, the
implementation of public policy and the publication of fiscal
information so as to enable the public to scrutinise the conduct of
fiscal policy and the state of public finances;
(b) stability and predictability in fiscal policy making process and
in the way fiscal policy impacts the economy;
(c) responsibility in the management of police finances, including
integrity in budget formulation;
(d) fairness to ensure that policy decisions of the State Government
have due regard to their financial implications on future
generations; and
(e) efficiency in the design and implementation of the fiscal policy
and in managing the assets and liabilities of the public sector
balance sheet.
5. Fiscal Policy Statements to be laid before the Legislature - The State
Government shall in each financial year lay before the House/Houses of the
Legislature, the following statements of fiscal policy along with the budget,
namely:-
(a) the Macroeconomic Framework Statement;
(b) the Medium Term Fiscal Policy Statement; and
(c) the Fiscal Policy Strategy Statement.
1 [(d)
the statement on the number of employees in Government,
Public Sector Undertakings and aided institutions and expenditure
of State Government towards salaries and pensions.]
6. Macro-economic Framework Statement - The Macroeconomic Framework
Statement, in such form as may be prescribed, shall contain an overview of the
State economy, an analysis of growth and sectoral composition of GSDP, an
assessment related to State Government finances and future prospects.
7. Medium Term Fiscal Policy Statement - (1) The Medium Term Fiscal
Policy Statement shall set forth in such form as may be prescribed the fiscal
management objectives of the State Government and three-year rolling targets
for the prescribed fiscal indicators with clear enunciation of the underlying
assumptions.
(2) In particular and without prejudice to the provisions contained in
sub-section (1), the Medium Term Fiscal Policy Statement shall include the
various assumptions behind the fiscal indicators and 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;
(iii) the estimated yearly pension liabilities worked out on
actuarial basis for the next ten years.
Provided that in case it is not possible to calculate the
pension liabilities on actuarial basis during the period of first
three years after the 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.
8. Fiscal Policy Strategy Statement - The Fiscal Policy Strategy Statement
shall be in such form as may be prescribed and shall contain, inter alia,-
(i) the fiscal policies of the State Government for the ensuing
year relating to taxation, expenditure, borrowings and other
liabilities (including borrowings by Public Sector
Undertakings and Special Purpose Vehicle and other
equivalent instruments where liability for repayment is on
the State Government), lending, investments, other
contingent liabilities, user charges on public goods/utilities
and description of other activities, such as guarantees and
activities of Public Sector Undertakings which have potential
budgetary implications;
(ii) the strategic priorities of the State Government in the
fiscal area for the ensuing year;
(iii) the key fiscal measures and the rationale for any major
deviation in fiscal measures pertaining to taxation, subsidy,
expenditure, borrowings and user charges on public
goods/utilities; and
(iv) an evaluation of the current policies of the State
Government vis-a-vis the fiscal management principles set
out in section 4, the fiscal objectives set out in the Medium-
Term Fiscal Policy Statement in sub-section (1) of section 7
and fiscal targets set out in section 9.
1 . The clause (d) added by the Act No. 15 of 2006, Section 2
9. Fiscal Targets - (1) The State Government may prescribe such targets as
may be deemed necessary for giving effect to the fiscal management objectives.
(2) In particular, and without prejudice to the generality of the foregoing
provisions, the State Government shall,-
(a) reduce revenue deficit by an amount equivalent to at least 0.32
percentage point of GSDP in each financial year, beginning from
the 1st day of April 2005, so as to eliminate it by 31st March 2009
and generate revenue surplus thereafter;
1[Provided that for the financial years from 2015-16 to 2019-
20, the Revenue Deficit shall not be more than 2.5 % of GSDP
including onetime additional borrowing of Rs. 2,534 crore
permitted by Government of India for the year 2019-20.
Provided further that for the financial year ending March
2021, the Revenue Deficit shall be contained within 4.5% of GSDP
and reduced progressively thereafter.”.]
2[(b)reduce fiscal deficit by an amount equivalent to atleast 0.25
percentage point of Gross State Domestic Product in each financial
year beginning from the 1st day of April, 2005, so as to bring it
down to not more than 3 percent; subject to the fiscal deficit limits
fixed by the Government of India from time to time.
Provided that for the financial year ending March, 2009 the
fiscal deficit shall not be more than 3.5 percent of G.S.D.P and for
the financial year ending March, 2010 the fiscal deficit shall not be
more than 4 percent of G.S.D.P.]
3[Provided further that for the financial years from 2015-16
to 2020-21, the Fiscal Deficit shall not be more than 5 % of GSDP,
including onetime additional borrowing of Rs. 2,534 crore
permitted by Government of India for the year 2019-20 and
including 2% of GSDP additional borrowing permitted by
Government of India for FY 2020-21 in the wake of Covid-19
pandemic, and sought to be progressively reduced thereafter.]
(c) ensure within a period of five years, beginning from the initial
financial year on the 1st day of April 2005, and ending on the 31st
day of March 2010, that the outstanding total liabilities do not
exceed 35 per cent of the estimated GSDP for that year;
4[(cc)ensure within the subsequent period of five years, beginning
from the financial year on the 1st day of April, 2010, and ending on
the 31st day of March, 2015, that the total outstanding liabilities
do not exceed 27.6 percent of the GSDP, as prescribed by the
Government of India in pursuance of the recommendations of
Thirteenth Finance Commission, year wise as follows:
for the financial year 2010-11 30.3 percent of GSDP
for the financial year 2011-12 29.6 percent of GSDP
for the financial year 2012-13 28.9 percent of GSDP
for the financial year 2013-14 28.2 percent of GSDP
for the financial year 2014-15 27.6 percent of GSDP]
1
. Added by Act No.34 of 2020, s.2
2 . The clause (b) and the proviso substituted by the Act No. 7 of 2010 Section 2.
3
. Added by Act No.34 of 2020, s.2
4 . The Clause (cc) inserted by the Act No.8 of 2011 Section 2.
1[(ccc)ensure that for the financial years from 2015-16 to 2020-21,
the outstanding total liabilities do not exceed 35 per cent of the
estimated GSDP and maintain thereafter, including onetime
additional borrowing of Rs. 2,534 crore permitted by Government
of India for the year 2019-20 and 2% of GSDP additional borrowing
permitted by Government of India for FY 2020-21 in the wake of
Covid-19 pandemic.”.]
(d) limit the amount of annual incremental risk weighted
guarantees to 90 per cent of the TRR in the year preceding the
current year:
Provided that revenue deficit and fiscal deficit may exceed
the limits specified under this section due to ground or grounds of
unforeseen demands on the finances of the State Government
arising out of internal disturbance or natural calamity or such
other exceptional grounds as the State Government may specify:
Provided further that a statement in respect of the ground or
grounds specified in the first proviso shall be placed before the
House or Houses of the Legislature, as soon as maybe, after such
deficit amount exceeds the aforesaid targets.
10. Measures for Fiscal Transparency - (1) The State Government shall take
suitable measures to ensure greater transparency in its fiscal operations in the
pubic interest and minimise as far as practicable, secrecy in the preparation of
the 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
budget, make disclosures on the following, along with detailed information in
such forms as may be prescribed,-
(a) the significant changes in the accounting standards, policies
and practices affecting or likely to affect the computation of fiscal
indicators;
(b) details of borrowings by way of Ways and Means Advances/
Overdraft availed of from the Reserve Bank of India.
(3) Whenever the State Government undertakes to unconditionally and
substantially repay the principal amount and/ or pay the interest of any
separate legal entity, it has to reflect such liability as the borrowings of the
State.
11. Measures to enforce compliance - (1) The Minister-in-Charge of the
Department of Finance (hereinafter referred to as Minister of Finance) shall
review, every quarter, the trends in receipts and expenditure in relation to the
budget estimates and place before the House or Houses of the Legislature, the
outcome of such reviews.
(2) Whenever there is either shortfall in revenue or excess of expenditure
over the intra-year targets mentioned in the Fiscal Policy Strategy Statement or
the rules made under this Act, the State Government shall take appropriate
measures for increasing revenue and/or for reducing the expenditure,
including curtailment of the sums authorised to be paid and applied from out
of the Consolidated Fund of the State.
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 or any other expenditure, which is required to be incurred
under any agreement or contract, which cannot be postponed or curtailed.
1
. The clause (ccc) inserted by Act No. 34 of 2020 Section 2.
(3) (a) Except as provided under this Act, no deviation in meeting the
obligations cast on the State Government under this Act shall be permissible
without approval of Legislature:
(b) Where owing to unforeseen circumstances, any deviations is
made in meeting the obligations cast on the State Government
under this Act, the Minister of Finance shall make a statement in
the House or Houses of Legislature explaining, -
(i) any deviation in meeting the obligations cast on the State
Government under this Act;
(ii) whether such deviation is substantial and relates to the
actual or the potential budgetary outcomes; and
(iii) the remedial measures the State Government proposes to
take.
(4) Any measure proposed in the course of the financial year, which may
lead to an increase in revenue deficit, either through increased expenditure or
loss of revenue, shall be accompanied by a statement of remedial measures,
proposed to neutralise such increase or loss and such statement shall be
placed before the House/Houses of Legislature.
(5) The State Government may set up an agency independent of the State
Government to review periodically the compliance of the provisions of this Act
and table such reviews in the House or Houses of the State Legislature.
1[(6-A)
The total value of capital works sanctioned, other than Stage-1
sanctions, by any Department in a financial year under the appropriate Head
of Account shall be such that,-
(i) the cumulative value of sanctioned works including spill over
commitments shall not exceed three times of budget estimate for the
corresponding Head of Account for that year; and
(ii) the total value of works scheduled to be executed as per
contractual requirements; in that year including spill over commitments shall
not exceed one and a half times the budget estimate for the corresponding
Head of Account for that year.
(6-B) The Minister of Finance shall review, every quarter, and shall,-
(i) places the matter before the Council of Ministers to evolve a
mechanism to bring the sanctions within limits, where the works sanctioned
are not in accordance with the provisions under sub-section (6-A) for any
quarter;
(ii) place the matter before the Legislature, where the works
sanctioned are not in accordance with the provisions under sub-section (6-A)
for two successive quarters; and
(iii) ensure that the works sanctioned are brought in accordance
with sub-section (6-A) within two financial years, where the works sanctioned
are not in accordance with the said provisions as on the date of
commencement of the said provisions under sub-section (6-A).
(6-C) If for any special reasons, as may be prescribed, works are
sanctioned exceeding the limits in a financial year, the Minister of Finance
shall during the year place before the Legislature the reasons therefor and the
schedule for restoring it to the prescribed limits.]
12. Protection of action taken in good faith - No suit, prosecution or other
legal proceedings shall lie against the Government or any officer, authority or
1 . The sub-sections added by the Act No. 3 of 2014 Section 3 (w.e.f 17.02.2014)
person empowered to exercise the powers and perform the functions by or
under this Act for anything which is in good faith done or intended to be done
under this Act or the rules or orders made thereunder.
13. Application of other laws not barred - Save as otherwise provided the
provisions of this Act shall be in addition to and not in derogation of any other
law for the time being in force, except to the extent the provisions of other laws
are inconsistent with ahy provisions of this Act.
14. Power to remove difficulties - If any doubt or difficulty arises in giving
effect to the provisions of this Act, the Government may, by order make such
provisions or give such directions not inconsistent with the provisions of this
Act as may appear to it to be necessary or expedient for removal of doubt or
difficulty:
Provided that no order shall be made under this section after the expiry
of two years from the commencement of this Act.
15. Power to Make Rules - (1) The State Government may, by notification in
the Official Gazette, make rules for carrying out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following matters, namely, -
(a) the form of the Macroeconomic Framework Statement under
section 6;
(b) the form of Medium-Term Fiscal Policy Statement, including the
targets for the fiscal indicators, under section 7;
(c) the form of Fiscal policy Strategy Statement under section 8;
(d) the forms for disclosure under sub-section (2) of section 10;
(e) measures of enforce compliance;
(f) the manner of review of compliance of the provisions of this Act
by the independent agency under section 11; and
(g) any other matter which is required to be, or may be, prescribed.
(3) Every rule made under this Act shall be laid, as soon as may be after
it is made, before the House or Houses of the Legislature, while it is in session,
for a total period of thirty days which may be comprised in one session or in
two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid, the
House/Houses agree in making any modification in the rule or the House/
Houses agree that the rule should not be made, the rule shall thereafter have
effect only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that rule.
16. Repeal of Ordinance No. 9 of 2005 - The Andhra Pradesh Fiscal
Responsibility and Budget Management Ordinance, 2005 is hereby repealed.
