The Punjab Cabinet on Thursday took a slew of vital decisions for the development of the state, including approval of the rules for implementation of Punjab Fiscal Responsibility and Budget Management (FRBM) Act, 2003.

Facts :

• The framing of these rules was necessary as the state Government had entered an agreement with the Asian Development Bank, under which it would get a loan of USD 200 million (Rs. 1200 crore approximately).
• On fulfilment of the necessary conditions, the first tranche of USD 50 million (Rs. 316.92) and the 2nd tranche of USD 50 million (Rs. 337.06 crore) had already been received by the state.
• As per the conditions of the agreement for release of 3rd tranche of USD 100 million, it was necessary for the state Government to make Fiscal Responsibility and Budget Management Rules.
• The move will help the state achieve specific fiscal targets within a stipulated time period to avail the benefit of the Centre’s Debt Consolidation & Relief Facility for states.
• The FRBM Act was framed by the Government of India in 2003 on the basis of the model draft bill circulated by the Reserve Bank of India, suitably amended from time to time.
• As per the recommendations of the 14th Finance Commission, each state is mandatorily required to enact a Fiscal Responsibility Legislation to realize the desired targets.

Background :

• Under the provisions of FRBM Act, 2003, the state government’s borrowings are restricted to a maximum of 3 per cent of the GSDP but the Punjab state had made a plea that it should be allowed to raise it to 4.5 per cent.
• As per the allowed limit, the government can borrow only Rs 12,810 crore. The government had sought relaxation for taking another loan of Rs 10,000 crore for loan waiver.
• With consistent pleas of Punjab government to raise its borrowing limit under Fiscal Responsibility and Budget Management (FRBM) Act 2003, the Centre finally allowed the state to raise an amount of Rs 3240 crore annually over and above the prescribed limit.
• With the permission, the fund-crunched Punjab government would be able to borrow money to pay the farm loan waiver of Rs 9500 crore it had notified.
• Earlier the pleas were declined as the Centre was said to be wary of relaxing the norms for Punjab stating similar demands from other states would follow.
• But in a fresh plea the Centre had allowed Rs 31,000 crore term loan for alleged food scam and Rs 15,000 crore for UDAI scheme, over and above the FRBM limit, and that the same can be done for the term loan repayment for Punjab.

Some other Initiatives approved by Punjab Cabinet :

• The cabinet gave nod to frame the Punjab Waqf Rules, 2018 under the Waqf Act, 1995 (Central Act 43 of 1995).
• As per sub-section (1) of the section 109 of the aforesaid act, the State Government has been authorized to make rules by notification in the official gazette to carry out the intended purposes of the Act.
• Notably, the Waqf Act, 1995 has been enacted by the Parliament for providing better administration of Auqaf and for matters connected therewith or incidental thereto.
• The Cabinet has also approved the annual administrative reports for works executed by Soil and Water Conservation Department for the year 2014-15 and Cooperation Department for the year 2015-16.