Odisha to amend FRBM Act to create fiscal space
The amendment is being made as per the flexibility provided by the 14th Finance Commission in its Fiscal Consolidation Roadmap to set the fiscal deficit targets and annual borrowing, Chief Secretary A P Padhi said.
In an effort to create more fiscal space to finance higher capital outlay and takeover the debt burden of PSUs, the state government today decided to suitably amend the Odisha Fiscal Responsibility and Budget Management (FRBM) Act, 2005.
A proposal in this regard was approved at the cabinet meeting presided over by Chief Minister Naveen Patnaik. The amendment is being made as per the flexibility provided by the 14th Finance Commission in its Fiscal Consolidation Roadmap to set the fiscal deficit targets and annual borrowing, Chief Secretary A P Padhi said.
Stating that the amendment would create space to go for big borrowing in order to enhance capital outlay, Padhi said fiscal deficit of the state will be anchored to an annual limit of 3 percent of the GSDP.
"The state will be further eligible for an additional borrowing limit of 0.25 percent of the GSDP in a given year for which the borrowing limits are to be fixed if the interest payments are less than or equal to 10 percent of the revenue receipt in the preceding year," Padhi said.
Therefore, the chief secretary said, the state can have a maximum fiscal deficit-GSDP limit of 3.5 percent in any given year. The flexibility in availing the additional limit under either of the two options or both will be available to the state only if there is no revenue deficit in the year in which borrowing limits are to be fixed and the immediately proceeding year, he said.
"Odisha fulfils both the conditions and thus qualifies for additional borrowing ceiling of 0.5 percent. Our state needs the additional fiscal space to finance higher capital outlay to foster economic growth," Padhi said.
This apart, the chief secretary pointed out that the scheme Ujwal DISCOM Assurance Yojana (UDAY) has been launched by the Ministry of Power with an objective to turnaround the finance of state owned power distribution companies (DISCOMs) to improve operational and financial efficiency.