Kerala’s KIIFB on the boil as ED launches probe

Our Bureau Thiruvananthapuram | Updated on March 03, 2021

‘Off-budget’ borrowings under scanner


Kerala Finance Minister Thomas Isaac has dared the Centre to do what it can with Kerala Infrastructure Investment Board (KIIFB), a body corporate financial institution set up by the cash-strapped State government to mobilise funds from outside sources for infrastructure development in the state.

“If the idea is to continue to intimidate the State government in the matter, we would be ready to give it back in kind,” Isaac thundered in a Facebook post after the Enforcement Directorate (ED) announced a probe into the working of the key infrastructure funding arm of the State government.

Made poll campaign issue

The probe could not have been timed better given the context of elections to the State Assembly having been called for April 6 and the Pinarayi Vijayan-led government hitting the campaign mode parading the perceived success of several development projects financed using the KIIFB mop-up.

The ED is learnt to have asked senior officials of Axis Bank, key banker to the project, to appear for interrogation. KM Abraham, former chief secretary and CEO of the KIIFB Board, has been directed to be present at its Kochi office on Friday. The ED has also summoned the Deputy CEO to appear a day earlier for interrogation.

Alleged violations of Act

The agency is primarily probing violations of the Foreign Exchange Management Act (FEMA) in the financial transactions involving the board, including floating of Masala bonds abroad. The agency may probe even more angles of the financial deals as the investigation progresses, sources indicated.

The Chief Minister is the chairman of the KIIFB Board and the Finance Minister, its Vice-Chairman. The Chief Secretary, the Vice-Chairman of the State Planning Board, and Secretaries of Law, Finance and Finance Resources are members. There are also seven independent members on the board.

Nirmala Sitharaman-speak

KIIFB was earlier in the news after Union Finance Minister Nirmala Sitharaman criticised the State Budget saying it was prepared and presented in a manner that all money went to KIIFB. “I don’t quite understand this. All money goes into KIIFB. What is this organisation?” she had wondered at a public function in Kochi last week.

“We make the Budget in the Union Government. We don’t give all money to one organisation and say ‘theek hain, dekhte hain.’” Even the Comptroller and Auditor General has taken exception to the working and functioning of KIIFB. If this is Budget-making all about, no wonder why Kerala is going into the debt trap.”

Funding support questioned

Sitharaman was alluding to the funding support to KIIFB via dedicated Fuel Cess and Motor Vehicle Tax which are ring-fenced. The state is bound to provide for any shortfalls to meet debt servicing requirements of KIIFB constituted under the Kerala Infrastructure Investment Fund Act 1999 (with Amendments under the 2016 Act).

Isaac took exception to her criticism saying what she said about the institution was ‘utter foolishness’. The Union Finance Minister has ‘no understanding’ of the issues at stake and people expect a little bit ‘more standard’ and ‘serious attitude’ from a person occupying that post.

No understanding of issues

“Her words prove that she has not only failed to do her homework but has also no understanding of the issues. The Union Finance Minister must not feel offended if I say, ‘shame on you’,” Isaac had written in Facebook post after the Union Minister questioned the role of the KIIFB in Budget-making.

Isaac said the CAG had claimed that the income and expenditure of KIIFB was not part of the state’s budget. “When that criticism reached Sitharaman, it was turned upside down. Whoever wrote the speech for her, all I have to say is that there was no need to reduce her to the status of a clown.”

The Central Budget has over Rs 1-lakh crore off-budget borrowings but KIIFB’s borrowings are not ‘off-budget. Even NHAI borrows money to provide funds for road construction, which is not part of the Centre’s income and expenditure. KIIFB too is a body corporate. “We cannot accept the stance that certain things can be done by the Centre but not by the State government,” Isaac said.

Published on March 03, 2021

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