Para 10.17 — MSO (A&E)
Original Rule Text
10.17 Under Article 292 and 293 of the Constitution, the Union and the States are empowered to give guarantees in respect of loans raised by others within such limits as may be fixed from time to time by Act of Parliament or, as the case may be of the Legislature of the State. Such guarantees constitute contingent liabilities of Government and it is an essential duty of the Accountant General (Accounts and Entitlement) to keep a close watch over the guarantees given by the State to see that limits prescribed by the Legislature are not exceeded. It is necessary that the total amount of such guarantees as also the amount of guarantees invoked during the year should be mentioned in the report on the accounts of the State. It should also be ascertained that any general or special orders issued by the Government for levying a commission for giving a guarantee are duly observed.
What This Means
Under Articles 292 and 293 of the Constitution, both the Union and State Governments can give guarantees on loans raised by other entities (like public sector undertakings or cooperatives), within limits set by Parliament or the State Legislature respectively. These guarantees are contingent liabilities. The Accountant General (A&E) must closely monitor that guarantee limits are not exceeded, report the total guarantees and any invoked guarantees in the State's annual accounts, and verify that any commission charged by the government for providing guarantees is properly collected.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Government guarantees on third-party loans are contingent liabilities
- 2Guarantee limits are set by Parliament (Union) or State Legislature (States)
- 3AG (A&E) must ensure guarantee limits are not exceeded
- 4Total guarantees and guarantees invoked during the year must appear in annual accounts
- 5Government commission on guarantees must be levied as per applicable orders
Practical Example
A State Government has guaranteed loans totaling Rs. 10,000 crore for various state-owned corporations. The State Legislature has set a guarantee limit of Rs. 12,000 crore. A new guarantee request of Rs. 3,000 crore comes up. The AG flags that approving this would breach the legislative limit by Rs. 1,000 crore. The AG also checks whether the government has collected the 0.5% guarantee commission it mandated on all such guarantees.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is a contingent liability from government guarantees?▼
What must be reported about guarantees in the annual accounts?▼
Can the government charge a fee for providing guarantees?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.