The ruling CPM and the Opposition Congress in Kerala continues to trade barbs over the Kerala Infrastructure Investment Fund Board (KIIFB). Kerala Finance Minister T M Thomas Issac attacked the CAG’s draft report that questioned the borrowing capacity of the KIIFB and Opposition Leader Ramesh Chennithala questioning the projects funded by the Board.
The whole controversy began after Issac lashed out against the Draft CAG report that questioned KIFB’s borrowing capacity. Soon after, the opposition lashed out against the Finance Minister, stating that he had no moral right to be in office as he had leaked out the CAG report before it was tabled in the assembly.
Let the controversies and allegations go on. Indian flash now looks at what actually KIIFB is.
Coming into existence on November 11, 1999, KIIFB was established under the Kerala Infrastructure Investment Fund Act 1999. It came into force with the aim to provide investment for projects in Kerala, especially in sectors of Power, Irrigation, Water Supply, Roads, Inland Navigation, Solid Waste Management, Drainage and Ports.
KIIFB Governing body
Chief Minister of the state is the Chairman and Finance Minister is the Vice Chairman. – Minister for Finance
Members
- Chief Secretary to Government
- Vice-chairman of State Planning Board
- Secretary (Law)
- Secretary (Finance)
- Secretary (Finance Resources)
- Seven independent members who are experts, who have worked in an institution of national repute in one or more of the areas of Finance, Economics and Banking.
Executive Committee
Chairman – Minister For Finance
Members
- Chief Secretary
- Secretary (Law)
- Secretary (Finance)
- Secretary (Finance Resources)
- Three Independent Members of the Board, to be nominated by Government
- Chief Executive Officer
FUND TRUSTEE & ADVISORY COMMISSION (FTAC)
- The Fund Trustee & Advisory Commission functions as the trustee of KIIF. It ensures that all investments serve the purpose and intent of the Act. It also makes sure that and that there is no diversion of the funds.
- Comprises of three to five members including a chairperson.
- FTAC will have a two-year term and the members cannot members cannot be removed either by government or KIIFB.
Fund mobilisation
Main source of through general obligation bonds against unconditional government guarantee and revenue bonds with structured payment mechanism to be issued by state government.
Government guarantees the payment of the principal and interest of any fund proposed to be raised.
Need of KIIFB
The Central government has set limits to the borrowing capacity of states. As such the states had limited capacity for borrowing from the market. KIIFB is for bypassing the Central Act to raise funds for the need of state.
Repayment of money
Under the KWF Act, KIIFB gets a share of Motor Vehicle Tax and Petroleum Cess collected by the State. The regular cash flows are mainly from a share of the Motor Vehicle Cess, (which started with 10 per cent in 2017-18 and rose to 50 per cent by 2022) and a minimum of Rs I per litre of petrol sold in the State. This comes to almost Rs 1.200 crore every year.
Criticisms
- Lack of accountability. The funds mobilised and spent by the agency is outside the purview of Legislative Assembly.
- KIIFB will have to raise Rs 1 lakh crore over a period of ten years to repay the debt at nine percent interest if all projects materialise.
- Cess on petrol, diesel and vehicles will not be enough to pay the interest on the debt
- Most of the projects sanctioned so far are for upgradation of educational institutions, construction of rural roads, which does not generate income.
- KIIFB fund is used to invest in loss-making Public Sector Undertakings.