Keeping in view the fact that only 80 per cent of the central government’s liabilities are covered by assets even as per the government accounting system which is cash based, the health of public finances is linked to the both formal guarantees, and implicit guarantees.
In other words, wherever the government is owner, directly or indirectly, there is an inevitable obligation on the part of the government to the discharge of liabilities in order to avoid reputational risk while declaring a government owned enterprise as insolvent.