No more loans, no new projects: UDF government moves to rein in KIIFB

THIRUVANANTHAPURAM: The UDF government is preparing to discontinue the Kerala Infrastructure Investment Fund Board’s (KIIFB) existing financing model following an expert committee report that flagged alleged irregularities and substantial financial losses to the state government. Chief Minister V.D. Satheesan said the Cabinet would decide on an investigation and further action at its next meeting.

KIIFB was a flagship initiative of the previous LDF government. The expert committee has recommended that the institution should not continue in its present form. The government will stop transferring motor vehicle tax directly to KIIFB, and no fresh loans will be raised in its name. No new projects will be taken up, and the government will not provide guarantees for new projects. Existing projects will continue.

The report, prepared by an expert committee headed by former IAS officer Sudha Pillai, was tabled in the Legislative Assembly yesterday. It also alleges that land transactions were carried out under the cover of KIIFB.

‘Super cabinet’ that sidelined finance department

According to the report, KIIFB functioned like a “super Cabinet”, rendering the Finance Department ineffective. The government provided guarantees for several projects in violation of established norms, even overriding objections from the Finance Department. The report also states that KIIFB weakened government departments.

The committee has recommended stopping KIIFB’s borrowings and removing more than 420 additional employees. It has also recommended that the Comptroller and Auditor General (CAG) audit KIIFB’s operations over the past ten years.

‘Massive land deal in Kannur’

The report alleges that land worth thousands of crores of rupees was purchased in KIIFB’s name without adequate justification.

In Kannur alone, 1,000 acres of land were purchased for Rs. 2,489 crore. A notification was issued to acquire another 3,829 acres at a cost of Rs. 9,572 crore.

However, only 50 acres in total have been utilised across two projects involving the land, according to the report. It says there is no explanation for acquiring such large tracts. The land was purchased at prices more than five times the market rate, the report alleges.

Financial loss estimated at Rs. 39,036 crore

The report estimates the financial loss associated with KIIFB at Rs. 39,036.17 crore, based on two components.

1. Additional project expenditure: Projects that the government could have implemented directly for Rs. 48,574.82 crore were undertaken through KIIFB at a cost of Rs. 61,678.46 crore. The resulting difference amounts to additional expenditure of Rs. 13,103.64 crore.

2. Reduction in the state’s borrowing limit: The Centre reduced the state government’s borrowing limit by Rs. 25,932.53 crore on account of KIIFB’s borrowings.

The committee adds these two amounts to arrive at the estimated total of Rs. 39,036.17 crore.

“If KIIFB continues, the state and the government will collapse. The implementation of the KIIFB model itself is the main reason for the current financial crisis,” Chief Minister V.D. Satheesan said.