Para 3.13.6 — MSO (Audit)
Original Rule Text
What This Means
This para lays out the comprehensive audit checks for government borrowings. Audit must ensure borrowings do not exceed legislative limits, loan proceeds are properly accounted for and spent only on authorised purposes, conditions imposed by the Centre (for State loans) are complied with, and adequate arrangements exist for debt repayment (amortisation). Detailed principles govern how amortisation should be structured depending on whether the loan purpose is productive or unproductive.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Borrowings must not exceed limits fixed by the Legislature
- 2State Governments must comply with conditions imposed by the Centre for consent or guarantee
- 3Loan proceeds must be properly accounted for and spent only on authorised objects
- 4Adequate amortisation arrangements must exist and audit must flag inadequacies
- 5Amortisation period should relate to the purpose and asset life, not just loan maturity
Practical Example
A State Government borrows Rs 2,000 crore specifically for building irrigation infrastructure (productive purpose, 30-year asset life). The auditor checks that: (a) the borrowing is within the State Legislature's ceiling, (b) Central Government consent was obtained, (c) all Rs 2,000 crore is accounted for and spent only on irrigation works, and (d) the debt redemption plan is geared to a 30-year amortisation matching the asset life, not stretched to 50 years. If Rs 200 crore was diverted to salary payments, the auditor raises a serious objection.
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 the difference between productive and unproductive borrowing?▼
What is the Debt Redemption Scheme?▼
Can amortisation be skipped for highly profitable assets?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.