The finance ministry has asked all ministries and departments to assess the government guarantee requirement for the current fiscal and submit a prioritised list. Fiscal Responsibility and Budget Management (FRBM) rules stipulate that the government cannot guarantee more than 0.5 per cent of the GDP of the respective financial year to Central Public Sector Enterprises (CPSEs) or entities.
“All the ministries or departments are requested that prioritized guarantee requirement for FY 2021-22 may be worked out and only such proposals where the loan agreement can be signed and guarantee agreements can be executed during the current financial year may be included,” the finance ministry said in a circular dated June 7, 2021. The guarantee already approved by the Budget Division under the Department of Economic Affairs but not executed till March 31, 2021 also needs to be revalidated, it said.
Therefore, such proposals may also be included in the total guarantee for 2021-22, it added. The government guarantee helps the departments, CPSEs or entities to borrow funds at cheaper rate as the instruments are backed by the Centre.
“The information sought is only to have overall picture of guarantee requirement for 2021-22 and to allocate guarantee space. Mere projection of the guarantee requirement and allocation of space should not be construed that the guarantee has been approved by the Competent Authority,” it said. Information in this regard in the prescribed format is required to be submitted by June 15, it added.