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KIIFB Controversy Between Kerala & CAG – Free PDF Download

 

Recent Discussion

Not so rosy numbers…!!!

The News

The News

  • The Finance Minister of Kerala, K.N. Balagopal, has strongly objected to observations in a recent audit report by the Comptroller and Auditor General (CAG) for 2020 – the State Finance Report that was tabled in the Assembly on November 11 on the Kerala Infrastructure Investment Fund Board (KIIFB)’s “off-Budget borrowings”.
  • The CAG asked the Kerala Government to disclose details of off-budget borrowings made through the (KIIFB) and Kerala Social Security Pension Ltd (KSSPL) in the budget and accounts.

What is this KIIFB?

  • Kerala Infrastructure Investment Fund Board (KIIFB) is a body corporate constituted by the Government of Kerala to mobilise financial resources for infrastructure development of the State.
  • It was established on November 11, 1999 through Kerala Infrastructure Investment Fund Act 1999.
  • In 2016, the then newly elected Left Front Government decided to considerably expand the scope of KIIFB’s operations, and to use this institution to speed up infrastructure building and economic growth in Kerala.
  • Projects through KIIFB
  • Between August 2016 and November 2021, the Kerala State Government granted approval for 918 infrastructure projects worth ₹64,338 crore with funding through KIIFB.
  • These projects are aimed to enhance Kerala’s capabilities in the areas of transport, energy, information technology, water sanitation, and the social sector.
  • As on March 31, 2020, of the 675 projects that received approval for funding through KIIFB, work had been started on 269 projects, with a total spending of ₹10581.8 crore.

How is KIIFB funded?

  1. KIIFB mainly raises funds through term loans from public sector banks and other financial institutions.
  2. Another source of money to KIIFB is the money raised through a chit fund scheme for non-resident Indians (Pravasi chitti scheme).
  3. In 2019, KIIFB became the first ever State Government agency in India to access the offshore debt market through Masala bonds.
  4. KIIFB is also assured of funding from the State Government, which shares a part of the motor vehicle tax and the fuel cess with KIIFB.
  • Note: In 2019-20, KIIFB received ₹2,200 crore from the State Government while it also raised ₹5,165 crore through term loans and the Masala bonds.

What is the problem area?

  • KIIFB has been in the news for quite sometime now..!!!
  • Comptroller and Auditor General (CAG) has raised concerns about KIIFB in its audit on Kerala’s finances for 2018-19 & 2019-20.
  • The CAG has pointed out that the borrowings by KIIFB are outside of the State budget and, therefore, do not have legislative approval.
  • The CAG has also expressed fears that the State Government may have to repay the liabilities of KIIFB in future which may become unsustainable.
  • Kerala govt Argument
  • State Government is opposed to the findings by the CAG, and the State Assembly has already passed a resolution in this regard in Feb 2021 itself.
  • According to the State Government, KIIFB’s borrowings may be termed as contingent liabilities.
    • They will become a liability on the Government only when KIIFB defaults.

Kerala govt Argument

CS Financial relations

 

 

 

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