Ordinance on fiscal responsibility act to be issued

State to get Rs 1,378 cr debt relief from the Centre

The Andhra Pradesh government today decided to issue ordinance for the enactment of 'Andhra Pradesh Fiscal Responsibility and Budget management Act-2005,' to make the management of public finances more accountable and transparent.

The hurried decision came after the advise given by Union Finance Minister P Chidambaram to chief minister Y S Rajasekhara Reddy at Delhi a couple of days ago on mopping up of additional resources as required by the state.

The Act is part of the defined path of fiscal discipline which is linked with attractive scheme of write-off of central loans among others, as envisaged by the 12th Finance Commission.

Under the debt relief due to consolidation and reschedulement of Central loans and reduction of interest rate to 7.5 per cent, the state will gain up to Rs 2,683.74 crore between 2005-06 and 2009-10 and incentive for debt relief based on fiscal performance during the same period would be Rs 3,824 crore.

These incentives will be available only to those states which enact a fiscal responsibility legislation. The ordinance will enable the state government to get the write-off of current year's debt and also interest relief to an extent of Rs 1,378 crore, according to chief minister Y S Rajasekhara Reddy.

The objectives of the Act include elimination of revenue deficit and build-up adequate revenue surplus by 2008-09, pursue necessary policies to raise non-tax revenue to ensure cost recovery and also equity, to lay down the principles governing capital expenditure which should lead to growth, equity and welfare.

The Act has been built on the principles of transparency in implementation of public policies by way of publication of fiscal information.

For example, finance minister will have to place before the state assembly, the quarterly review of receipts and expenditure in relation to the budget estimates.

The state cabinet which met here on Thursday also approved the decision to issue two more ordinances. These include creation of a unified services of Panchayat Raj and government teachers by abolishing their present cadre and expanding the scope of the state backward classes commission to enable it to also consider reservations in educational institutions.

Briefing on the cabinet decisions, chief minister Y S Rajasekhara Reddy said that the ordinance with regard to BC Commission has been necessitated to avoid any legal tangles to its recommendations.

It directly pertains to the government's intention to reintroduce reservations to minorities in educational institutions, once rejected by the state high court.