278 DR. BABASAHEB AMBEDKAR : WRITINGS AND SPEECHES
Thus was broken the financial and administrative strand which tied the Provincial Governments to the Central Government and prevented the introduction into them of responsible government. As the Provinces thereby acquired “an acknowledged authority of their own” over the services and sources allocated to them it followed that they should have the freedom to borrow in their own name, which was denied to them heretofore. Consequently the Local Government Borrowing Rules’ made under the Reforms Act provided that subject to certain conditions : [2]
“A Local Government may raise loans on the security of the revenues allocated to it for any of the following purposes, namely:
( a ) To meet capital expenditure on the construction or acquisition (including the acquisition of land, maintenance during construction and equipment) of any work or permanent asset of a material character in connection with a project of lasting public utility, provided that:
(i) the proposed expenditure is so large that it cannot reasonably be met from current revenues, and
(ii) if the project appears to the Governal-General in Council unlikely to yield a return of not less than such percentage as he may from time to time by order prescribe, arrangements are made for the amortization of the debt;
( b ) to meet any classes of expenditure on irrigation which have under rules in force before the passing of the Act been met from loan funds ;
( c ) for the giving of relief and the establishment and maintenance of relief works in times of famine or scarcity ;
1 Rules under Section 2 ( 2 ) of the Government of India Act, 1919.
2 The rules required that:
(1) No loan shall be raised by a Local Government without the sanction (in the case of loans to be raised in India) of the Governor-General in Council, or (in the case of loans to be raised outside India) of the Secretary of State in Council, and in sanctioning the raising of a loan the Governor-General in Council or the Secretary of State in Council, as the case may be, may specify the amount of the issue and any or all of the conditions under which the loan shall be raised.
(2) Every application for the sanction of Secretary of State shall be transmitted through the Governor-General in Council.