The finance ministry has asked other ministries and departments not to issue 'Letter of Comfort' to any hired entity for undertaking projects on their behalf, as part of efforts to improve transparency in fiscal management.
Issuance of 'Letter of Comfort' by the ministries and department helps a vendor in achieving financial closure for a project in a faster manner.
The authority to issue 'Letter of Comfort' by ministries or department or any entites of the Government of India stands withdrawn with immediate effect, an office memorandum issued on March 31 said.
"Henceforth, no 'Letter of Comfort' will be issued by any entity within the government," it added.
Infrastructure ministries like railways were authorised to issue 'Letter of Comfort' to contractors engaged in development of projects.
There were also fears that 'Letter of Comfort' could be misused.
Under the provision of the fiscal responsibility law, the budget requires to provide details of guarantees given by the government.