Para 10.10 — CAM

10.10 GUARANTEES GIVEN BY CENTRAL GOVERNMENT 10.10.1 Guarantees create contingent liabilities and it is necessary to account for the same. Government generally gives guarantee against the loans taken by Central Public Sector Undertakings. Article 292 of the Constitution of India extends the executive power of the Union Government to give guarantees on the security of the CFI, within such limits, as may be fixed by Parliament. Beginning with the financial year 2004-05, the Fiscal Responsibility and Budget Management Act, 2003 (FRBM Act) and the Rules made there under prescribes a limit of 0.5% of GDP for guarantees to be given in any financial year. If this limit is exceeded owing to unforeseen circumstances, the Finance Minister is required to make a statement in both Houses of Parliament to explain the deviation. The statement should explain whether the deviation is substantial, if it relates to actual or any potential budgetary outcomes, and the remedial measures that the Government proposes to take in the matter.