KIIFB has plunged Keralam into severe financial crisis, says Keralam Chief Minister VD. Satheesan

Referring to the findings of an expert committee headed by former Planning Commission Member Secretary Sudha Pillai, Chief Minister V.D. Satheesan on Thursday said the Kerala Infrastructure Investment Fund Board (KIIFB) had plunged the State into a severe financial crisis.

He was speaking to the media after tabling the 96-page ‘Report of the committee on a comprehensive review of KIIFB’ in the Assembly.

The government would examine the contents of the report and consider ordering an investigation, he said. “We will go through it in detail and take action on it,” he said, adding that the panel had found serious irregularities as well as deviations from Constitutional provisions, Rules of Business of the government, and provisions of the Fiscal Responsibility and Budget Management (FRBM) Act.

The transactions of the KIIFB, which the previous LDF government used as a special purpose vehicle to finance major infrastructure projects, had resulted in “huge losses” for the government. While the committee recommended that the State make provisions in the annual Budget for meeting KIIFB’s repayment obligations, it also noted that the government would need ₹70,415.54 crore in the years up to 2041-42 to service KIIFB’s debt and complete its projects, Mr. Satheesan said.

Further, the panel found serious fault with the KIIFB administration and land acquisition. The committee found that the KIIFB’s cost of borrowing exceeded the State’s own open market borrowing cost in every year of comparison. This avoidable charge had been pegged at ₹396 crore a year, the Chief Minister said. The Masala Bond issued by the KIIFB also incurred an excess cost of ₹181.73 crore for the government.

“According to it, the State incurred an excess cost of ₹13,103 crore by implementing projects through the KIIFB. Also, virtually the entire State tax revenue flow into the KIIFB (50% of Motor Vehicles Tax and the petroleum cess) was used for repayment of KIIFB’s own borrowings. While the government transfers amounted to ₹11,869.28 crore, ₹11,944.18 crore was spent on debt servicing,” Mr. Satheesan said.

He further noted that the designation of CEO KIIFB (K.M. Abraham) as an Ex-Officio Secretary to the government, opaqueness in disbursing money to consultancies, and irregularities in land acquisition had been cited as serious deviations by the panel. “The panel has found that the KIIFB had been operating as an empire independent of the State government and the Finance department,” Mr. Satheesan said.

The Chief Minister also drew attention to the panel’s findings regarding stark imbalances in district-wise allocation of projects (three districts alone cornered 41% of the projects) and land acquisition (52.9% in Kannur district alone). Among the locations, Kannur alone accounted for an acquisition plan of 1,000 acres, but no industrial activity had been initiated there, he said.

Mr. Satheesan said the panel’s findings vindicated the UDF’s stand on KIIFB.