West Bengal Ceiling on Government Guarantees Act, 2001
Finance, Performance Guarantee
GOVERNMENT OF WEST BENGAL
LAW DEPARTMENT
Legislative
No. 1489-L Dated 31st July, 2001
NOTIFICATION
West Bengal Act XVII of 2001
THE WEST BENGAL CEILING ON GOVERNMENT GUARANTEES ACT, 2001.
An Act to provide for ceiling on Government Guarantees and other matters connected therewith or incidental thereto.
Whereas it is expedient to provide for ceiling on Government Guarantees issued on behalf of the Government departments, public sector undertakings, local authorities, statutory boards, corporations and co-operative institutions and for promoting fiscal discipline of the State;
It is hereby enacted in the Fifty-second Year of the Republic of India, by the Legislature of West Bengal, as follows:-
1. Short title and commencement.
(1) This Act may be called the West Bengal Ceiling on Government Guarantees Act, 2001.
(2) It shall come into force on such date as the State Government may, by notification, appoint.
2. Definitions.
In this Act, unless the context otherwise requires,-
(a) “Government” means the Government of West Bengal;
(b) “Government Guarantee” includes the guarantee given by the State Government on behalf of the Government departments, public sector undertakings, local authorities, statutory boards, corporations and cooperative institutions;
(c) “notification” means a notification published in the Official Gazette-,
(d) “Performance Guarantee” includes the documents such as letters of comfort, paper purchase agreement, state support agreement, concession agreement for infrastructure project and other agreements, guaranteed in certain performance on behalf of Government departments, public sector undertakings, local authorities, statutory boards, corporations and co-operative institutions.
3. Ceiling on Government Guarantees.
The total outstanding Government Guarantees as on the first day of April of any year shall not exceed ninety per cent of the State revenue receipts of the second preceding year of such year as they stood in the books of the Accountant General of West Bengal:
Provided that the ceiling on the Government Guarantee shall not apply for any loan raised by the West Bengal Infrastructure Development Finance Corporation Limited under the guarantee given by the Government and fully availed of by the Government itself for funding different infrastructure projects and for repayment of which there is specific provision in the budget of the State.
4. Prohibition.
Notwithstanding anything contained in any other law for the time being in force,-
(a) no Government Guarantee shall be given in respect of a loan of any private individual, institution or company;
(b) no Government Guarantee shall be extended to the co-operative institutions unless the share capital contribution from the non-Government sources is not less than ten per cent of the total equity proposed.
5. Guarantee commission.
(1) The Government shall charge a minimum of one per cent as guarantee commission which shall not be waived under any circumstances.
(2) Depending on the default risk of the project, the Government may, by notification, specify commission at an enhanced rate.
Explanation.- For the purposes of this section, ‘default risk’ means the probability of default by the borrower on whose behalf the Government Guarantee is given, depending on the amount borrowed, the type of industry and the economic situations.
6. Performance Guarantee.
(1) In the interest of development of infrastructure project the Government may continue to give Performance Guarantee to all such sectors.
(2) The Government shall lay before the Legislative Assembly of the State a comprehensive report on the liabilities (in rupees) that the State may incur in future, if the State fails to meet the contractual obligation stated in the Performance Guarantee.
(3) The report referred to in sub-section (2) shall be laid within six months of the date of giving Performance Guarantee:
Provided that if the Legislative Assembly of the State is not in session or is not sitting on the date on which the said period of six months expires, the said period of six months shall be deemed to expire on the first day on which the Legislative Assembly first sits after the aforesaid date.
By order of the Governor,
A. K. BHATTACHARYA
Secy. to the Govt. of West Bengal