Public accountability must as Kerala sits on huge drag of KIIFB public debt
News analysis

Public accountability must as Kerala sits on huge drag of KIIFB public debt


Nothing seems to be going right with the much-hyped Kerala Infrastructure Investment Fund Board (KIIFB) with its huge liability that can run into around Rs 50,000 crore and not a single worthwhile project undertaken so far. The grandiloquence of Chief Minister Pinarayi Vijayan and Finance Minister Thomas Isaac will fail to veneer the controversies surrounding it.

From masala bonds to the latest row over refusal to allow Comptroller and Audit General to audit the accounts, the board is set to turn into a big drag on the State's exchequer. The masala bonds through which KIIFB raised Rs 2,150 crore from overseas market at 9.72 per cent interest is a major threat to the State's finances.

And when the masala bonds were floated on the London Stock Exchange, Marxist Isaac waxed eloquently as a votary of Keynesian economics.

This is also the case with the amounts raised from other institutions by KIIFB like the Rs 1,000 crore from State Bank of India at 9.15 per cent interest rate, over Rs 560 crore from Nabard at 9.3 per cent, Rs 500 crore from Indian Bank at 9.15 per cent and another Rs 500 crore from Union Bank of India at 8.95 per cent.

Ironically, Isaac justified the high rate for the masala bond listed on LSE, when outside the country interest rates are very low. Financial analysts say that funds across Europe and the US are available in the 1.5-3 per cent range interest. Yet, KIIFB went in for funds at rates as high as more than 9 per cent which remain unexplained.

Sources in the know of things said the State would have to dole out huge amounts as interest. And when the time would come for the paying the capital, it would be time for some other Government having to struggle with a huge burden of debt.

While no major project has been undertaken which will yield immediate revenues, a good part of the borrowed amounts have been deposited in financial institutions and the interest earned would in no way meet the amount of over Rs 360 crore annually to be paid as interest on the funds borrowed. It is basically grants from the Government that make up for these mismatches and also run the establishment, all from the exchequer.

None of the projects being planned is to fetch money immediately. Of the 469 projects approved prior to the State Budget, 450 do not generate revenue. This explains why Opposition Leader Ramesh Chennithala could challenge the Government to come out with the name of any one worthwhile income-generating project.

The Government argument, even when it came to rebuilding Kerala after the devastating 2018 flood, is that once the infrastructure is readied, investment will start flowing into the State and generate revenue to clear the huge debts incurred.

To make matters worse, it has appointed retired bureaucrats and officials in KIIFB paying huge amounts as salaries and perks. The case of retired Additional Chief Secretary  KM Abraham as CEO is a classic case of flouting the law.

Service rules are clear that when a retired official is reinstated (KIIFB is a Government establishment), he can draw a salary after deduction of his pension amount which cannot be higher than the salary he drew when in service. This order was issued by none other than Abraham when in service.

KIIFB sources admit that he draws an additional amount of around Rs 1 lakh and the appointment order states he is eligible to an annual increment of 10 per cent.

But more disturbing is the attempt to build a wall against making public KIIFB dealings. Or else, the Government would not have courted controversy by refusing to let CAG audit the accounts. The law is that CAG audits the accounts of all public sector entities. While Pinarayi and Issac have been claiming CAG can audit the accounts of KIIFB, officials keep things under wrap and refuse to part with the account just like in the case of Kannur International Airport Ltd (KIAL) where several irregularities were noted. The duo cannot even feign ignorance as CAG has sent letters to them too.

If the government is not against CAG auditing the accounts of KIIFB, the pertinent question remains why it has appointed a private firm to audit the accounts, and that too paying from public account.

Worse still is the official argument that entrusting things to CAG "will drive away private Investors". CAG is a constitutional body and it is duty bound to audit all those bodies of the State, and KIIFB and KIAL are no different.

This explains why Chennithala took up the matter with Governor Arif Mohammed Khan who has promised to look into the matter. At a campaign as part of the Pala by-election, Pinarayi said on Thursday the Government had actually planned to raise Rs 50,000 crore through the KIIFB over a period of five years, and could initiate projects worth Rs 45,000 crore.

Through KIIFB, the State is sitting on a debt that matches the amount officially claimed to be the loss suffered during the 2018 flood alone. Pinarayi has taken offence to the demand that the Government should come clean on KIIFB, saying it was a ploy to ruin it.

KIIFB had been developed as an alternative source to cover the fund crunch faced by the infrastructure sector, he said. But it is a huge public debt his Government has incurred and should be audited as per law by the Constitutional body CAG, if his Government wants to come clean and has nothing to hide.