Jammu, Feb 5: Both the houses of state legislature Monday passed a Bill to amend the Jammu and Kashmir State Fiscal Responsibility and Budget Management Act-2006.
The bill was earlier moved by the Minister for Finance Dr Haseeb A Drabu in both the Houses and was passed by voice vote.
The Amendment Bill envisages use of capital receipts for creation and maintenance of productive assets and the borrowing over and above existing fiscal deficit limit for the purpose of clearing past liabilities or creating of fresh assets with a bearing on Consolidated Fund of the State.
The Bill also envisages maintaining the fiscal deficit to an annual limit of 3 percent of GSDP for 2015-16 to 2019-20 with a flexibility of 0.25 percent over and above the limit for the same period.
Pertinent to mention here that the FRBM Act 2006 provides responsibility to the Government to ensure prudence in fiscal management and fiscal stability by adopting progressive financial management practices consistent with fiscal sustainability, greater transparency in fiscal operation of the Government and conduct of fiscal policy in a medium term framework and for matters connected therewith or incidental thereto.
Finance Minister Dr Haseeb Drabu, while following the Budget Cabinet decision, had made an announcement in the Budget Speech 2015-16 and proposed a change in FRBM Act 2006 from year 2015-16 to ensure that over the next three years, it is mandated that borrowings are used only to finance the creation of capital assets.
Keeping in view the Budget announcement, Section 7, sub-section (2) for clause (ii) of the FRBM Act 2006, which provides for the use of capital receipts, including borrowings for generating productive assets, is being substituted by the words “the use of capital receipts for creation and/or maintenance of productive assets and the borrowings over and above the existing fiscal deficit limit for the purpose of clearing past liabilities and/or creating fresh assets.”
Further, the proposed Bill envisages amendment of section 9, sub-section (2) for clauses (a) and (c), which shall be substituted namely; “ensure that the revenue surplus of the State is maintained throughout the award period of the 14 Finance Commission” and “maintain fiscal deficit to an annual limit of 3 percent of GSDP during the award period for the 14th Finance Commission (2015-2019).
Besides, the Amendment Bill also envisages addition of three clauses after clause (e) in the Section 9. These additions include provide for flexible limit of 0.25 percent over and above the 3 percent of GSDP for any given fiscal year to which its fiscal deficit is to be fixed if its debt-GSDP ratio is less than or equal to 25 percent of the preceding year,
It also provides for additional 0.25 percent of GSDP in a given year for which the borrowing limits will be fixed if the interest payments are less than or equal to 10 percent of the revenue receipts in the preceding year and maintain a ceiling on the sanction of new capital works three times of the annual budget provision.